Treasury snubs KQ plea for Sh7bn virus bailout


Kenya Airways chief executive Allan Kilavuka. PHOTO | DIANA NGILA

The Treasury has refused to offer a commitment to Kenya Airways’s #ticker:KQ request for a Sh7 billion emergency bailout after its aircraft were grounded due to the restrictions on international passenger flights sparked by the coronavirus pandemic.

Treasury Cabinet secretary Ukur Yatani said the State was keen on a long-term solution anchored on nationalisation of Kenya Airways, arguing the carrier’s financial troubles go beyond the corona-related woes.

The national carrier needs money for the maintenance of the grounded planes, payment of staff salaries and settlement of utility bills like security, water, electricity and parking fees.

The freeze on all cross-border passenger flights on March 22 and restriction of movement into and out of four counties including Nairobi, Mombasa, Kwale and Kilifi to curb the spread of the virus has hit Kenya Airways hard.

Mr Yatani reckons that the Treasury is keen to pursue a turnaround under the plan to nationalise Kenya Airways, which was approved by lawmakers in July. “We are not making any commitments at this stage,” he said about the Sh7 billion bailout. “Kenya Airways need to remain afloat but it is also important to look at structural challenges because what is happening now is more than the business environment.”

He added that a restructuring plan backed by the Treasury and Transport ministry is ready and would be unveiled in coming weeks.

Kenya wants to emulate countries like Ethiopia, which runs air transport assets — from airports to fuelling operations —under a single company, using funds from the more profitable parts to support others. Under the model approved by MPs, Kenya Airways will become one of four subsidiaries in an aviation holding company.

The others will be Jomo Kenyatta International Airport, an aviation college and Kenya Airports Authority, which will operate all other airports.

Kenya Airways was privatised more than 20 years ago but sank into debt and losses in 2014 after a failed expansion drive and a slump in travellers.

In August, it saw its first-half pretax loss more than double from a year earlier to Sh8.56 billion.

Kenya Airways is surviving solely on cargo business, which is also facing stiff competition from Ethiopian Airlines.

Kenya Airways chief executive Allan Kilavuka said revenue from the carrier’s cargo business is not adequate for the airline to meet its obligations.