Kenya Airways seeks investor in cash-rich foreign airline

Kenya’s National Treasury wants a cash-rich foreign airline to buy a majority stake in Kenya Airways (KQ, Nairobi Jomo Kenyatta) as a solution to return the national carrier to profitability, Nation Media reports.

This is the word of Chris Kiptoo, appointed Principal Secretary of the National Treasury, who appeared before the Departmental Finance and Planning Committee at County Hall in Nairobi on November 14, 2022.

He told lawmakers the equity investor should inject capital and offer management expertise in the next stage of the flagship’s restructuring. The state would reduce its 48.9% stake and reduce the ownership of lenders who would convert their debt to hold 38%. No mention was made of Air France-KLM, which owns 7.76% of Kenya Airways.

Kiptoo said Kenya would prefer a foreign airline as a strategic investor in a plan that could provide the national carrier with aviation expertise and reduce its reliance on the state for operational cash. “It is time to review the national carrier and ensure that it continues to operate without government support. We need to bring in a strategic investor,” he said.

He said Kenya Airways operated profitably when backed by KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) and the government needed to revert to this model to bring the airline back to profitability.

Kiptoo made no mention of the pan-African alliance project between Kenya Airways and South African Airways (SA, Johannesburg OR Tambo), which have set themselves the objective of putting in place the structure of a new group holding company by end of 2023.

Cabinet Secretary for Roads, Transport and Works, Kipchumba Murkomen, has hinted at a plan to split Kenya Airways into various subsidiaries along its main business divisions of passenger, cargo and ground handling services. stopover, all running at a loss.

Murkomen told parliament that the state would not convert its loans into shares. “We don’t want to cross the 50% mark because we want Kenya Airways to remain a private company,” he said.

The airline, which has survived thanks to state bailouts since the pandemic, reported a loss of KES 9.8 billion (USD 80.3 million) in August 2022, an improvement from the loss of 11 .48 billion KES (94.1 million USD) in the same period in 2021. It recorded an additional loss of 5.3 billion KES (43.4 million USD) on hedged exchange differences, bringing its loss total to KES 14.9 billion ($122.2 million). Passenger services recorded an operating loss of KES 4.5 billion ($36.9 million), cargo of KES 1.74 billion ($14.2 million) and ground handling of 166 million KES ($1.3 million).

Kenya Airways is currently being restructured with government loans that will have to be repaid. The restructuring plan came after the government scrapped a plan approved in 2019 to fully renationalise the airline. State loans include KES 20 billion (USD 173.9 million) in May 2022; KES 11.3 billion (approx. USD 95 million) in the six months ending June 30, 2022, after loans of KES 11 billion (USD 95.2 million) in 2020 and KES 14 billion (USD 121.1 million) in 2021.

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