Inside KQ' bid to stop a decade-long financial haemorrhage

Kenya Airways acting CEO George Kamal during an interview at the Kenya Airways Headquarters office in Nairobi on August 27, 2026. [Edward Kiplimo, Standard]

National carrier Kenya Airways (KQ) is eyeing a turnaround through a mix of strategies that diversify its revenue streams, with cargo seen as among the lucrative but untapped growth areas.

Other options include aggressive cost-cutting, including a review of contracts with suppliers, with the onboarding of a strategic investor and a Sh360 billion capital injection expected to cap the efforts, putting the carrier on a firm footing.

It is, however, an all too familiar path that the carrier has taken in the past that has not turned around its fortunes.

A decade ago, the carrier nearly collapsed following a debt-fueled expansion. In executing the ambitious project Mawingu, the carrier borrowed heavily to finance its fleet and route expansion and placed orders for wide-body aircraft, but the project failed after the orders were delayed but also suffered reduced demand.

This left it with huge dollar-denominated loans and aircraft lease payments that it could not keep up with.

It has since then been seeking to recover, starting with a 2017 plan that saw it go through staff layoffs, subleasing aircraft to other carriers and converting debts to equity that saw some of its lenders become shareholders, with the KQ Lenders Company 2017 Ltd now holding a 38 per cent stake at the carrier.

KQ acting chief executive George Kamal said the current turnaround plan that the carrier is implementing addresses the root cause of the airline's problems and steers away from past short-term fixes, including layoffs.

Captain Kamal said the carrier is implementing a growth-focused plan that aims at initially stabilising the carrier, including the return of its grounded planes to operation by early next year as well as cost-saving and capital raising.

Among the areas he cites is KQ’s re-looking at its contract with suppliers and, where necessary, calling them to the table for a renegotiation of terms.

“We are opening every single contract in this company. We are drilling down to the cent,” he said, adding that there are suppliers who are willing to modify contracts with the carrier, including the firms that KQ leases aircraft from.

“We have been having discussions with all the lessors,” he said, noting that factors such as seasonal demand for planes and also when aircraft makers unveil new models were among the factors to consider.

“When an equipment manufacturer gets a new aircraft into the market, they are more expensive. So once you get the new model in the market, then the older model gets cheaper. Then at that point you have the discussion with the lessors.”

Whether the negotiations with aircraft lessors and other suppliers have had an impact on its operating costs, Kamal noted that “the negotiations have yielded some savings, mostly over the current half... not in the first half. But it's a continuous process. It's not something you do today, and it's done in one day,” he said.

He added that in instances where there has been pushback from the suppliers who are not willing to take a haircut, the carrier has looked for alternatives. These included the carrier producing its own water, which has helped save about 50 per cent of the cost that it used on water for its inflight operations.

The turnaround strategy generated KQ's first profit in over a decade in 2024, the carrier is still grappling with major vulnerabilities.

These include the high cost of fuel that hit the carrier’s earnings over the first half of this year following the crisis in the Middle East that resulted in a surge in fuel costs.

The carrier has also been grappling with engine supply chain bottlenecks that resulted in reduced capacity due to the grounding of some of its planes, as well as the weight of legacy debt servicing, all of which continue to drag on its performance.

Despite the challenges, the carrier posted a nine per cent growth in revenues over the first half of this year. The carrier’s revenues increased to Sh81 billion from Sh74 billion.

This, however, was not enough for the airline to reverse its loss-making, and it posted a Sh16 billion half-year loss, compared to Sh12 billion that it made over a similar period last year.

“We do not have a demand problem. Demand is high, but we had lower availability of aircraft,” he said.

Diversification is the other prong of the carrier's recovery and growth. Kenya Airways is eyeing a 40 per cent market share in the cargo business, which it hopes will lift its earnings in the coming years as margins from passenger fare earnings get squeezed.

“We are working on increasing our cargo from 11 per cent market share to 40 per cent market share. This will mean growing from 70 tonnes of cargo per day to 250 tonnes per day. That is the target... there's no discussion about it,” he said.

Other areas of diversification include expanding its Maintenance, Repair and Overhaul (MRO) centre.

The airline currently has two hangars where it can undertake maintenance and repair work on five aircraft at the same time.

It is looking at expanding this to have 14 lines, tripling the facility’s capacity. KQ expects the expanded capacity to save it Sh1 billion annually in what it pays other MRO centres to undertake repairs on its planes. The current facility is limited and cannot undertake major MRO functions such as engine overhauls.

In addition to cost savings, the carrier expects an increase in the number of aircraft from other airlines that will be serviced at its expanded MRO facility. At the moment, KQ says it has MRO contracts with 26 airlines.

“Over the next 10 years, we are planning to expand the facility into what will be an MRO City which will have 10,000 people employed directly,” he said.

“That also brings hard currency into the country. Today we are limited and have to undertake some repairs in other centres, for instance in Europe, which means we are exporting hard currency.”

The carrier’s plans are, however, tied to finding a strategic investor and also raising about Sh360 billion ($2 billion) in new capital.

“Investors are interested in Kenya Airways,” said Kamal. “We will evaluate the offers and take what is best for Kenya Airways and Kenya as a country, and then we start doing it. But in all cases, we have the strategy in place.”