The National Treasury of Kenya, the principal shareholder of Kenya Airways, may continue to fund the national carrier, which is currently seeking a strategic investor to help cut its losses. This development comes just over a year after the Treasury announced that it would devise a plan to stop using taxpayers’ money to fund Kenya Airways.
As reported by Business Daily, the national carrier disclosed that the Treasury confirmed via a written commitment that it plans to stand by to offer financial support to Kenya Airways beyond the anticipated deadline of December 2023. Early last year, the government said it would develop a turnaround strategy for the flag carrier.
A critical part of the strategy involved a financial plan that would not depend on operational support from the exchequer after December 2023. However, the government remains committed to providing the required financial assistance. The airline said in its latest annual report,
“The government of Kenya has committed, through a letter of support, to continue providing the required financial support to the group and company to enable it to implement its recovery program and meet its financial obligations as and when they fall due for at least the next 12 months from the date of approval of the annual financial statements for the year ended December 2023.”
This decision might see taxpayer money used to sustain the operations of the Nairobi-based airline. Last year, the government allocated $294 million (KES36.6 billion) to reorganize the flag carrier as part of its strategic investments in public enterprises. This allocation was in addition to the $213.7 million (KES26.6 billion) invested in the previous financial year.
The government has settled approximately 50% of the guaranteed debt.
The continued government support comes as Kenya Airways struggles to find a strategic investor to help turn its fortunes. Last year, during the US-Africa summit, Kenya’s President, William Ruto, was on a mission to search for a strategic partner to buy a controlling stake in the national carrier to stop its subsidization and set it on a growth path.
Photo: Markus Mainka | Shutterstock
The national carrier hopes to sell a 49% stake to an equity investor by year-end. In a recent interview with Citizen TV, Kenya Airways CEO Alan Kilavuka stated that numerous investors have expressed interest in the Nairobi-based entity. He expressed optimism that the capital injection could help the airline return to profitability.
“We’re looking for an equity investor that can invest up to a maximum of 49%, that’s the maximum. The reason that is the maximum is because the regulations in Kenya don’t allow you to have an airline operating certificate (AOC) if you have more than 50% foreign ownership.”
The capital injection will help strengthen the airline’s balance sheet through capital restructuring, ensure that it has adequate working capital for quick investment, and drive its expansion and modernization to remain competitive.
Since publishing this article, the carrier has increased JFK flights to 9-weekly.
In 2023, Kenya Airways recorded an operating profit of $80 million (Ksh10.53 billion), its first since 2017. This signified 287% growth compared to the previous year, when the airline recorded an operating loss of $42 million (Ksh5.6 billion). However, the airline still recorded a net loss of $173 million (Ksh22.69 billion), a 40.6% improvement from 2022.
Photo: Kenya Airways
The CEO attributed the improved financial performance to various steps taken during the year, including ramping up its scheduled operations and passenger charters, as well as partnerships with other airlines and cost containment measures. The carrier is now focused on continuing to build on the gains made in its turnaround strategy, project Kifaru.
What are your thoughts on the latest developments with Kenya Airways? Please let us know in the comments!
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