Kenya Airways gets another Sh36.6bn State bailout

The Treasury has concluded plans to offer Kenya Airways a further Sh36.6 billion bailout in the year starting July as part of efforts to prop up the national carrier amid recovery from the Covid-19 travel slump.

The allocation, contained in budget documents tabled in Parliament, comes weeks after MPs approved an Sh20 billion bailout to the airline.

This will push State support for the airline to Sh56.6 billion in under a year, making it the largest corporate bailout in Kenya.

Chief Executive Officer of Kenya Airways, Allan Kilavuka

The fresh Treasury allocation is labeled a strategic government investment and comes after the State dropped the plan to nationalise the airline.

“Amount of capital injected into Kenya Airways (KQ) Sh36.6 billion,” said the Treasury in documents.

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The allocation emerged in a period that saw the national carrier more than halve losses last year to Sh16.03 billion, helped by growth in revenue and some cost savings.

Like other airlines around the world, the carrier was pummeled by the closure of airspace in 2020, as governments tried to contain the spread of the coronavirus.

Things started to turn around last year, KQ said, boosting revenue by a third to Sh70.22 billion.

Total costs edged down 3.6 percent, partly helped by the renegotiation of plane leasing contracts, which led to significant savings.

But the national carrier still needs money for the maintenance of planes, payment of salaries, and settlement of utility bills such as security, water, electricity, and parking as well as easing the effects of the virus.

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Without State aid, the airline risked running out of money in the near future against the backdrop of unease among banks about lending to African carriers.

The bailout comes as the State dropped the favoured long-term solution for the ailing KQ that was anchored in nationalisation.

The nationalisation plan approved by lawmakers in July 2019 would have led to the delisting of the airline from the Nairobi Securities Exchange (NSE).

A law to pave the way for the nationalisation of the airline, which had been proposed before the pandemic, is before Parliament.

A law to pave the way for the nationalisation of the airline, which had been proposed before the pandemic, is before Parliament.

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Kenya wanted to emulate countries like Ethiopia which run air transport assets — from airports to fuelling operations —under a single company, using funds from the more profitable parts to support others.

 

Kenya Airways

Under the model approved by MPs, Kenya Airways would have become one of four subsidiaries in an aviation holding company.

The others would be Jomo Kenyatta International Airport, an aviation college, and the Kenya Airports Authority operating all other airports.

Wole Shadare