KQ pilot Koki Mutungi and Alex Mbugua, the finance director, join dancers in celebrating the arrival of the airline’s fourth Dreamliner at the JKIA in August last year. The airline will not purchase the remaining three of nine jets it had ordered from Boeing in 2006. PHOTO | SALATON NJAU
What you need to know:
Kenya Airways to lease remaining three Dreamliner jets as it eyes Middle East carriers like Qatar and Emirates in a cash-for-equity deal.
This is said to be part of new measures the airline hopes will boost its struggle to get out of its current financial crisis.
It is estimated that the airline would require about Sh18 billion to get out of the red.
Cash-strapped Kenya Airways has initiated talks with an airline from the Middle East in a bid to raise cash in exchange for equity.
Sources within the company also told Sunday Nation that the national carrier has abandoned midway its multi-billion project for the purchase of new Dreamliner jets.
This is said to be part of new measures the airline hopes will boost its struggle to get out of its current financial crisis.
Though the KQ management would not confirm or deny the engagement with a potential partner yesterday, CEO Mbuvi Ngunze is on record saying that the airline is looking for a partner with deep pockets.
Those in the know say Qatar Airways and Emirates are among those the national carrier is looking at for a potential partner.
“We cannot comment on this. It’s a shareholder issue,” the company said in an emailed response on Saturday.
The airline, which is expected to release its full-year financial results this month, has been in bad financial state and has in the past few months relied on short-term loans to pay workers and run daily operations.
It is estimated that the company would require about Sh18 billion to get out of the red.
Mr Ngunze said KQ would not purchase the remaining three of nine of Dreamliner jets it had ordered from Boeing in 2006 but would instead lease the aircraft from an Irish company.
The airline has already entered a sale and lease agreement with AWAS Aviation Trading Ltd, a company based in Ireland, meaning that the three planes will not be financed on the balance sheet of Kenya Airways.
“Given our current financing, we must be prudent in finding innovative financing solutions while keeping with our growth ambition. The new aircraft will be important additions to our fleet as we strive to give our guests the best experience possible,” the CEO said.
He said the lease deal would be beneficial to the company’s balance sheet as it seeks to improve its liquidity.
Huge debts have been a key player in the matrix that brought the national carrier to its knees. Most of this debt was acquired to finance the purchase of Dreamliner jets as part of a fleet modernisation project launched by former CEO Titus Naikuni.
The decision to rescind its intention to buy all the nine new Dreamliners midway and instead run three of those on a lease agreement could significantly prop the company’s financial standing.
After announcing a Sh10 billion loss in the half year, the worst performance in the history of Kenya’s corporate sector, the company said it would contract a financial advisor to help restructure its debt. But it is yet to contract one.
Analysts predict that the airline could report a bigger loss in the full-year results, given that most of the factors it blamed for the poor half-year performance have not significantly changed.
The airline had blamed its huge loss on cancellation of flights to West Africa after the outbreak of Ebola and reduced passenger numbers due to travel advisories issued against Kenya in the wake of high insecurity.
The airline has yet to resume its West African flights while the security situation in the country is still wanting.
This story was first published in the Sunday Nation.
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