Kenya Airways will receive another round of help from the government as it battles extreme financial struggles to stay afloat. The state treasury will loosen its purse strings once again just weeks after approving more than $170 million for the airline. The much-needed cash is expected to help the airline reorganize its structure and operations as it attempts to come back to life post-COVID.
State bailout
The Kenya government is once again coming to the rescue of the country’s flag carrier Kenya Airways by offering another bailout package amounting to approximately $314 million. The airline will receive this amount in the financial year starting in July as part of the government’s strategic investments in public enterprises to help the carrier get back on its feet.
In February, a $176 million cash injection from the government was also approved as the carrier’s business showed no signs of improving following years of financial losses and growing debt. This brings the total amount of cash given to the airline by the state to a little less than half a billion dollars in just under a year.
Financial woes
The airline’s finances weren’t exactly in the best of health even before 2020, but the COVID-19 pandemic made the situation far worse. By the end of 2020, Kenya Airways’ total debts stood at $846 million and grew significantly since then as the pandemic advanced.
Just days ago, it was revealed that the airline defaulted on interest for a $214 million loan owed to the government in the year ending December. Kenya Airways hasn’t seen a profit since 2012 and has even been suspended from trading at the Nairobi Securities Exchanges (NSE).
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Last year, its revenues improved slightly to around $600 million, but the carrier still needs cash to pay its employees apart from covering costs such as utility bills and parking fees. As reported earlier, the airline is also looking to trim its fleet size as part of a broader turnaround strategy that aims to cut costs and rejuvenate operations.
The airline enlisted the London-based Steer Group to put together a turnaround plan last year. While nothing has been officially confirmed, it could see its fleet size reduces significantly.
Restructuring
Talks of a significant restructuring of Kenya Airways have been around for a while now. But such a churn within the airline is expected to come with a significant shake-up, with many people possibly losing employment.
According to a report by The Standard, National Treasury CS Mr Ukur Yatani commented on April 7th,
“Kenya Airways will be required to trim its network, rationalize frequencies of flights, operate a smaller fleet, and rationalize its staff complement. I will be proposing a budget allocation to meet the restructuring costs.”
Given the present condition of the airline, the possibility of downsizing looks quite real.
What are your views on Kenya Airways’ financial condition? Do share your opinions below.
Source: The Standard