The International Monetary Fund (IMF) has set tough terms for Kenya Airways (KQ) bailouts, locking further funding to turnaround results to prevent wastage of taxpayers’ money.
In recent years, the airline that is expected to undergo restructuring costing more than Sh118 billion ($1 billion), has been hit by severe cash flow problems, making it unable to pay lessors and creditors’ due invoices. This has resulted in significant outstanding obligations.
“Steadfast implementation of Kenya Airways restructuring plan—with clear accountability linking exchequer support to progress on key performance metrics—remains essential to achieving a least-cost approach, even as KQ’s debt servicing needs for both guaranteed and unguaranteed amounts are being addressed and options are being sought to achieve cost savings in debt service,” IMF said.
Financial restructuring
Earlier this year, the airline appointed a US-based advisory firm, Seabury Consulting, to guide it on a financial restructuring and revival plan.
In a budget document tabled in Parliament in April, the Treasury indicated that it will offer KQ a further Sh36.6 billion bailout in the year 2022/2023 to prop up the national carrier as it recovers from the Covid-19 slump.
The allocation came just weeks after MPs approved a Sh20 billion bailout for the airline.
The Sh36.6 billion allocation, labelled, a strategic government investment, is expected to push State support for the airline to Sh56.6 billion in under a year.
Earlier this year, the State, which owns 48.9 per cent of KQ, abandoned plans to nationalise it as a long-term solution to its financial woes.
Shares suspended
The plan, which had been approved by lawmakers in July 2019, would have seen the airline delisted from the Nairobi Securities Exchange, where trading in its shares remains suspended since July 2020.
The State wanted to emulate countries such as Ethiopia, which run air transport assets— from airports to fuelling operations—under a single firm, using funds from the more profitable parts to support others.
Under the model, KQ would have become one of four subsidiaries, in an aviation holding company, including Jomo Kenyatta International Airport, an aviation college and the Kenya Airports Authority.
Travel picked up
The others would operate in all the other airports.
KQ narrowed its net loss for the year ended December by 56.58 per cent on higher revenue as travel picked up with the easing of Covid-19 restrictions.
It reported a net loss of Sh15.8 billion in the review period compared to a net loss of Sh36.2 billion the year before. BY DAILY NATION