Billionaire investor Chris Kirubi wants State to rescue Pride of Africa after huge loss

Nairobi: Billionaire businessman Chris Kirubi expressed shock at the announcement that Kenya Airways had reported a record loss of Sh29 billion.

The news, at the early morning investor briefing, was startling for many investors.

Mr Kirubi said the airline shares should be delisted from the Nairobi Securities Exchange and the firm operated as a parastatal.

"This is not a business to make money neither is it a business for the fainthearted," he added in a sentiment that could have sweeping implications for investors and taxpayers whose money has been spent to bail out the airline several times.

Last month, the National Treasury handed the firm Sh4.2 billion through a supplementary budget approved in the final days of the last financial year.

KQ Finance Director Alex Mbugua told reporters after the breakfast meeting that in the 12 months to March, the company had borrowed Sh50 billion – which excludes the Government bailout granted last month.

The airline had borrowed Sh130 billion at the close of its financial year on March 31, compared to Sh80 billion of similar period in 2014.

Now, the airline is seeking another Sh20 billion from the pan-African lender AfriExim Bank to plug the cash flow shortfall before a longer plan bailout is sought, technically known as bridge financing.

Among the options the executives would be seeking would be additional borrowing from the exchequer, further complicating the balancing for the various competing needs including essential services that the Government is trying to meet.

It was clear at the presentations that the business was not generating sufficient cash to support its operations and was increasingly relying on debt to keep afloat, at least in the short term.

Mr Mbugua was speaking shortly after the company released its full-year trading results, where it blamed the high cost of acquiring new aircraft and losses arising from hedging of fuel as the twin drivers of the record losses.

Plug debts

Now, the airline has been forced to keep borrowing to plug the debts that have fallen due, including loans from the Government of Kenya.

It is on that premise that Kirubi feels that the State should bail out the airline once and for all, and continuously provide funding like is the case for Mumias Sugar and other ailing State-owned firms.

KQ, he said, was not a business to make money but rather an airline with much more sentimental value for Kenya since it was a source of pride for the country.

"We must rescue our sinking ship," he said, to the relief of the top management of the airline, including Managing Director Mbuvi Ngunze.

But the MD responded saying that the airline was only flying over turbulence, painting the picture of brighter prospects in the future.