KQ investors in limbo as share trading suspended yet again

Broke national carrier Kenya Airways (KQ) shares will remain suspended from trading at the Nairobi Securities Exchange (NSE) for the third year in a row.

This after the Capital Markets Authority extended the suspension of the stock by 12 months starting yesterday in view of the ongoing turnaround efforts.

“The extension of suspension seeks to enable the company complete its operational and corporate restructure process,” said NSE in a notice yesterday.

“The extension of suspension from trading the company’s shares will remain in force for an additional twelve months, with effect from January 5, 2023.”

KQ’s stock was first blocked from trading on the NSE in July 2020 after MPs began to review the law that will pave the way for the government to take back full control of the airline.

Before its suspension from trading at the NSE, the airline’s share was trading at a lowly Sh3.83.

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The troubled KQ last year tapped US-based consultant Seabury Group to advise it on financial restructuring and a revival plan amid a government-backed bailout.

The airline reported a net loss of Sh9.89 billion for the half-year to June 30, 2022 compared to a loss of Sh11.49 billion reported over a similar period in 2021.

This came as the carrier said it had made progress in implementing a restructuring programme dubbed Re-ignite, which is expected to lead to a permanent reduction in costs such as aircraft leasing.

The reduction in aircraft leasing costs was among the milestones that the airline needed to achieve before the National Treasury can disburse more money to enable the carrier complete the restructuring.

Revenues rose 76 per cent to Sh48.1 billion from Sh27.35 billion in a similar period in 2021, which KQ attributed to increased travel as more economies opened up and spurred recovery from the initial impact of the Covid-19 pandemic.

Passenger revenue increased 109 per cent and was a key driver in pushing up income. The cargo business grew 18 per cent.

The airline’s recovery efforts were dented by higher fuel prices, with its operating costs going up 53 per cent to Sh53.11 billion from Sh34.63 billion last year.

Lower oil prices, the airline said, would have seen it reduce the loss further.

KQ Chairman Michael Joseph said during the release of the results in August that the government had agreed to finance the airline over the next two years, which will enable it to find a firm footing.

“Earlier this year, Parliament approved additional budget support to KQ,” he said.

“After lengthy negotiations with IMF and Treasury, it was agreed that KQ would get the financing over the next two years.”

“The release of these funds was conditional on KQ reaching certain milestones including reducing costs. This support will not be continuous. It will be the last but will put us on a path to recovery.”

Parliament approved Sh36.6 billion in the budget for the current financial year to fund the carrier’s turnaround plans.

President William Ruto’s government has said that it would within a year put the national carrier back on its feet and cut its reliance on State bailouts.

Gobbling up billions

Finding a cure for the long-ailing KQ has proven to be a headache for previous governments, with the airline gobbling up billions in bailouts without any sign of a recovery.

There are also reports that the government could sell its stake in the national carrier to a strategic investor or other airline.

The government has committed to offloading its stake in some of the loss-making State firms.

President William Ruto in October said the government would privatise between five and 10 state corporations over the next one year.

He also said there are plans to review the legal framework, which has in the past been cited as among the hindrances to the privatisation process.

The President, who spoke at a Nairobi Securities Exchange forum, expects most of the privatisation to be undertaken through public offers at the bourse, which he noted would also give Kenyans an avenue to buy into the companies.

Additional reporting by Macharia Kamau