State to Take Over 93.5B of KQ’s Debt, Ditches Nationalisation Plans

The Kenyan government has dropped plans to nationalise Kenya Airways (KQ) in favor of mechanisms to protect its financial interests in the flagship carrier, which include a debt take over and a cash injection. A treasury letter to the IMF says the government will take over Ksh 93.5 billion of KQ’s debt and inject Ksh 53.4 billion in the fiscal year ending June 2022 and the subsequent year.

“The authorities do not intend to nationalise the carrier and are considering appropriate mechanisms to protect the Exchequer’s financial interests during the restructuring process,” said Treasury CS Ukur Yattani in the letter. “As part of putting KQ on a sustainable footing, GoK will take over US$827 million of KQ’s debt. In addition, in FY2021/22 and FY2022/23, US$473 million will be provided as direct budgetary support to clear overdue payment obligations and cover the upfront costs of restructuring.”

In turn, the airline will undertake measures to turn around its operations, trimming down its networks, and operating a smaller fleet.

“KQ will be required to trim down its network, rationalise frequencies of flights, operate a smaller fleet, and rationalise its staff complement,” Reuters quotes Yattani.

Parliament approved the nationalisation of the carrier in June 2019, a process aimed at forming a holding company with four subsidiaries: Kenya Airports Authority, Kenya Airways, Jomo Kenyatta International Airport (JKIA), and a centralized aviation college. The process was anticipated to mirror success of other national carriers like Ethiopian airlines, making the airline more competitive, boost its financial muscle to acquire more fleets and save it from its debt quicksand. However, the plan faced turbulence as COVID-19 ravaged the global airline industry.

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