State lines up another bailout for loss-making Kenya Airways

Tough times: The airline has already issued a profit warning for 2019

Taxpayers could soon be forced to foot the bill for another bailout of the loss-making national carrier Kenya Airways (KQ).

National Treasury Cabinet Secretary Ukur Yatani said the government is prepared to inject more funds into KQ as part of the ongoing restructuring of the struggling airline.

“Kenya Airways is critical to the country and for the national brand, and the government cannot afford to lose it,” said Yatanni at the launch of the 2019 Tourism Sector Report on Friday.

“We have a plan, and Treasury is currently looking for resources for KQ to ensure it does not collapse.”

The announcement comes less than a month after Kenya Airways issued another profit warning, indicating that its loss for the year to December 2019 would be lower by 25 per cent or more.

It also comes at a time when the airline is currently searching for a new chief executive after immediate former boss Sebastian Mikosz left last month, several months to the end of his term.

A State bailout of the national carrier in 2017 raised Kenya’s commercial debt to Sh725.7 billion.

Parliament at the time approved the Treasury’s guarantee of $750 million (about Sh77.3 billion at the then exchange rate) loans owed by the ailing airline even as MPs called for the head of those responsible for sinking the “Pride of Africa” into astronomical debt.

Parliament last year approved a proposal by the Transport Ministry for the creation of a new holding company merged from operations of key aviation entities, including the Kenya Airports Authority, KQ and the Jomo Kenyatta International Airport.

However, several commercial banks hold a 38 per cent stake in the airline as part of a debt-for-equity swap in 2017 after KQ defaulted on its obligations to creditors.

The deal has now come back to haunt the State, which will now have to buy out the commercial banks and up to 80,000 small shareholders as part of the reorganisation settlement.

At the same time, Parliament last year warned that taxpayers stand to lose as much as Sh75 billion in debt taken by the national carrier and guaranteed by the government.

CS Yatani said the government is in the process of developing the administrative and legislative structures to breathe new life into the national carrier.