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KQ reverses pay cuts, gets Sh20bn bailout nod

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Kenya Airways chairman Michael Joseph during the airline's half-year results' briefing at the KQ hangar on August 27, 2019. PHOTO | DIANA NGILA | NMG

Kenya Airways #ticker:KQ has reversed pay cuts in light of signs of business recovery and MPs approving a Sh20 billion bailout.

The carrier was last month returned pay cuts of up to 25 percent in cash preservation efforts after the Treasury delayed wiring the bailout billions.

Kenya Airways chairman Michael Joseph said on Tuesday the airline had started paying full salaries on a day when it announced it had more than halved net losses to Sh15.8 billion, helped by growth in revenue and some cost savings.

The announcement on restored pay also came on a day when Parliament approved the supplementary budget, clearing the way for the Treasury to release the Sh20 billion.

The Treasury had frozen the Sh20 billion fearing censure by Parliament for releasing the money without MPs’ approval.

“Salaries have been restored,” Mr Joseph told the Business Daily.

KQ had resumed full payment of workers’ salaries in December 2021 after a protracted battle with the pilots’ union.

The union has been demanding the reinstatement of salaries to 100 percent, saying that the airline had started recovering from the Covid-19 disruptions.

Like other airlines around the world, the carrier was pummeled by the closure of airspace in 2020, as governments tried to contain the spread of the coronavirus.

Things started to turn around last year, Kenya Airways said, boosting revenue by a third to Sh70.22 billion and narrowing losses by 56 percent to Sh15.8 billion.

"We have seen a lot of markets opening," Hellen Mathuka, the airline’s chief financial officer, told an investor briefing.

Total costs edged down 3.6 percent, she said, partly helped by the renegotiation of plane leasing contracts, which led to significant savings.

The release of the Sh20 billion will ease the national carrier’s cash flow hitches and set the stage for its restructuring.

Besides salaries, the airline needs the money to settle utility bills such as security, maintenance of grounded planes, electricity and parking as well ease the effects of the virus that has obliterated global travel.

The bailout comes as the State dropped the nationalisation plan, which was approved by lawmakers in July 2019 and would have led to the delisting of the airline from the Nairobi Securities Exchange (NSE).

Kenya wanted to emulate countries like Ethiopia which run air transport assets under a single company, using funds from the more profitable parts to support others.

Now, the State is keen on pushing for the restructuring of the national carrier on the back of the multi-billion shilling bailout.

KQ will be required to reduce its network, operate a smaller fleet, and possibly lay off more staff under the bailout terms.

The airline flew 2.2 million passengers on its planes last year, a 25 percent growth over the previous year, while cargo business grew 29 percent to 63,726 tonnes. The latest loss means that KQ has now gone for nine straight years without profits, extending its accumulated losses to Sh144.64 billion.

The airline last made a profit in 2012 when it closed with net earnings at Sh1.66 billion.

The huge accumulated losses have seen KQ slip into negative equity, meaning it is technically insolvent. KQ’s negative equity deepened to Sh83.4 billion at the end of 2021 from Sh64.2 billion the previous year.

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