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financial|operations

Kenya plans to inject capital into struggling airline

31st January 2020

By: John Muchira

Creamer Media Correspondent

     

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The Kenya government plans to inject capital into Kenya Airways as part of the nationalisation process for the struggling national carrier.

National Treasury Cabinet Secretary Ukur Yatani revealed this month that government was working on a bail-out package to save the airline from total collapse.

He added that government would not allow the troubled and lossmaking airline to fold, owing to its importance to the country as a national brand and a source of pride.

Although he did not reveal the amount to be pumped into Kenya Airways, the chairperson of its board, Michael Joseph, told Parliament last year that $450-million was required to implement a successful turnaround.

The Kenya government has resolved to nationalise the national carrier, ultimately transferring its liabilities to government, which has injected billions of shillings into the airline over the years.

Government is the airline’s majority owner, with a 48.9% stake, while 11 commercial banks, which agreed to turn their $225- million debt into equity, control 38.1% of the shareholding.

The struggling airline expects its earnings for the 2019 financial year to be at least 25% lower than the 2018 figure.

“Although Kenya Airways realised improved revenue growth in [2019], profitability was constrained by the increased competition in the airline area of operations, which, in turn, has increased pressure on pricing in order to remain competitive,” Joseph said last month.

The airline is expected to report a net loss greater than the $75-million for 2018.

In the first half of 2019, its losses widened by a staggering 112% to $81.7-million, compared with $37.2-million for the corresponding period in 2018.

In recent times, the airline has depended on government bail-outs to survive, with the latest implemented in 2017, when the National Treasury guaranteed loans totalling $750-million.

As part of the nationalisation process, government will buy out the stake controlled by commercial banks and up to 80 000 smaller shareholders.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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