Kenya Airways will receive a Ksh 26.6 billion ($176 million) bailout according to supplementary budget for the fiscal year 2021 estimates by the National Treasury presented to Parliament.
“The financial support will help Kenya Airways to strengthen its cash flow and speed up the much-needed reforms in the airline, including in its fleet and operations. After successfully implementing these reforms, the airline will be in a better financial position t achieve long term success,” Transport Cabinet Secretary James Macharia said in a circular.
“The government’s financial support is contingent on Kenya Airways adhering to agreed reforms, including permanent cost reduction measures, increased productivity and improved operational efficiencies,” the CS said.
The capital injection is an alternative to the initial plan to nationalize the airline.
Press Release: Allocation of funds to Kenya Airways in the supplementary budget for the 2021/2022 financial year. @JamesMacharia_ pic.twitter.com/2xWLQjBhFz
— Ministry of Roads and Transport (@TransportKE) February 4, 2022
In the previous fiscal year, the airline received Ksh 53.4 billion (USD470 million) in direct budget support. The government had committed to absorbing Ksh 92.5 billion (USD814 million) of its debts accumulated by the end of 2020.
Kenya Airways reported a Kh36.2 billion loss in the 2020 financial year. However, in the first half of 2021, it narrowed its pretax loss by 20 per cent to KSh11.5 billion.
Treasury Unveils Ksh 113 billion Bailout Plan for Kenya Airways
The government has also recruited Seabury Consulting, part of Accenture, to help Kenya Airways evaluate options to restructure its debt.
In June 2021, the International Monetary Fund (IMF) said it was prudent for the country’s state-owned enterprises (SOE) strategy.
“Given the special circumstances and uncertainty facing the global airline industry, Kenya Airways has retained an international aviation expert to assist in defining a set of strategies for its future,” the IMF said in its June 2021 report.
“Kenya Airways has experienced losses in recent years and faces significant future challenges. Sector-specific expertise will contribute to a better understanding of major trends in the regional and local aviation market, the formulation of a viable business model for Kenya Airways and ensure the consideration of all least cost alternatives for the Exchequer.”
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