Kenya Airways secures three-year grace period on US$200 million state bailout repayment
Nairobi, Kenya (PANA) – The Kenyan government has granted its national carrier, the Kenya Airways, known by its code KQ, a three-year grace period before repaying a US$200 million bailout, which it received from an International Monetary Fund loan.
Kenya Airways Chief Executive Officer Allan Kilavuka, said on Monday, the airline, which returned to profitability in 2024 after 11 years of loss-making, was allowed to continue paying interest on loans but will repay the principal amount after three years.
“The IMF supported our plan to optimise our fleet. We were able to give out two aircraft and reduced our fleet costs. We have also continued to spend less on our lender moratorium since 2022 when we started our operational restructuring,” Kilavuka told reporters.
Kenya lent funds to the airline, whose shareholding includes 49% government shares.
The airline's 38% ownership is by a private financial vehicle known as the Kenya Lenders, which comprises local commercial banks which supported fleet purchasing through a Special Purpose Vehicle, a financial jargon for a special fund exempt from tax, and 7.8% shareholding by Royal Dutch carrier, KLM.
The latest shareholding structure shows the KLM, which previously owned 25% of KQ, diluted its shareholding to 7.8% after losing the airline’s management contract.
The KQ bailout was granted in Dec 2021, through an IMF programme, but the Kenyan government prematurely ended the deal after failing to follow through with 11 conditionalities tied to the loan, amongst them, restructuring the airline.
Kilavuka said while the airline was keen on implementing strategic shifts on the airline’s operations, including initially reducing the fleet over a nine-month period, its project funding through the IMF programme stopped midstream, while it implemented “Project Kifaru”.
Project Kifaru, Kiswahili word for Rhino, was meant to achieve a strategic shift, to survival, operations, stabilisation and growth in profits. It was crafted following the failure of Project Mawingu—which means “Clouds” which initially sought the reduction of fleet numbers to reduce operating costs and cutdown losses.
Under Project Kifaru, the airline moved away from operating aircraft with high operating costs and low profits.
However, since reducing its route network, through the various stages of Kifaru 1.0 and Kifaru 2.2, the airline has managed to hit a new format of growth and profitability.
The airline’s chief Executive said currently, the carrier is focused on growth and expansion.
“We are stuck in the middle. We want more aircraft to expand our routes and for maintenance. This is the reason we are looking forward to a strategic investor,” Kilavuka told reporters, without disclosing further details.
The airline has been seeking a new investor to inject funds into the route expansion following the failure of the expansion drive through the IMF-funded project.
“It is not unique for an airline to obtain a bailout from the government because of the unique role of the aviation sector in the economy,” Kilavuka said.
-0- PANA AO/MA 30June2024
