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Kenya Airways Needs $500 Million State Aid Package to Remain Airborne
Kenya Airways PLC is seeking $500 million from the Kenyan government to navigate the COVID-19 crisis after its first-half revenue plunged by 50%, per Group’s CEO Allan Kilavuka as reported by Bloomberg.
The airline is on the verge of nationalization, a process that is believed will put it on a level playing field with its closest, and regional, rival Ethiopian.
“If we don’t restructure the airline, and take the airline as is into this organization, then we are doing a disservice to the taxpayer,” said Kilavuka. “Right now it is under-capitalized, given the effects of Covid.”
Projections indicate Kenya Airways will need 24 aircraft over the next two to three years out of a current fleet of 34 passenger planes and two freighters, per Bloomberg. Talks are ongoing with six leasing firms to swap fixed rentals for utilization-based terms, while other proposals include moving unneeded airliners to short-term cargo use.
Cutting costs has been the carrier’s main motive during this unprecedented time with a focus on negotiating job cuts with the workers union. The company says up t0 1400 may be needed.
Kenya Airways announced earlier a three-month round of job cuts that are expected to be completed by Sep 30.
But even as the carrier aims at cutting costs, recapitalization would pare debt after the company’s liabilities increased to over $2 billion at the end of June, while providing capital for growth once markets begin to rebound, said the CEO.
The funds could be in the form of equity or a loan from the government, which is in talks to buy out minority investors including KQ Lenders Co. and Air France-KLM as lawmakers debate a nationalization bill.
Kilavuka maintains that Kenya should be the preferred intercontinental gateway to Africa as legislation talks continue on a merger between Kenya Airways PLC and the Kenya Airport Authority. The partnership will allow them to work hand in hand, especially important since 60% of revenue at Nairobi’s Jomo Kenyatta International hub is generated by the carrier.
“We want Kenya to be the preferred hub for the region. For that to happen the airport needs to grow and modernize and the airline needs to be efficient and responsive to the needs of the market,” noted Kilavuka.
Meanwhile, KQ has appointed APG Network as its GSA in Europe. The new agreement will provide for wide-ranging sales and marketing activities for Kenya Airways as well as full customer and agent support in 39 European markets.
“As a globally recognized airline with an excellent product and network, we are delighted to be partnering with Kenya Airways in Europe. The current aviation environment is of course challenging, but our offices in Europe are looking forward to creating a strong sales and operations structure for Kenya Airways to maximize sales as soon as the market returns,” said Richard Burgess, President of APG Network.
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