National carrier Kenya Airways (KQ) has ruled out investment partnerships with Middle Eastern airlines even as it scouts for a strategic investor to inject fresh capital into its business to restructure its debt-laden balance sheet.
KQ, which rebounded back to profit in the half year that ended June 2024 after a decade of losses, said that it targets to pick a financial adviser by mid-September to gauge its cash requirements before onboarding a strategic investor either in late December or early 2025.
“Africa is a large continent by land mass and is trying to trade within itself amidst infrastructural deficiencies. Because we are large, by necessity we need to fly to trade.
“So, aviation is critical for economic development and that is what the Middle East carriers have realised. They want to kick in now and take advantage of the potential” officer (CEO), Allan Kilavuka, told the Business Daily.
“We Africans need to wake up because other people will come and have our lunch” he added.
Mr Kilavuka said that KQ would not enter into a strategic investment partnership with Middle Eastern carriers because they were more focused on growing their airport hubs.
“The strategic investor should be suitable for Kenya and Africa. What we are hesitant to do is to have strategic investors who come here only for their benefit.
“Some of these carriers or investors are not necessarily good for Kenya or Africa because their aim is to grow their hub yet what we are interested in is to grow our hub here. If you do not create big aviation hubs in Africa, you will in effect be creating a big hub elsewhere,” the KQ boss said.
Middle Eastern airlines have recently made aggressive forays into Africa in search of new growth opportunities.
Doha-based Qatar Airways has, for example, taken on an aggressive Africa expansion strategy that has seen the airline acquire a 25 percent stake in South African regional carrier Airlink, which flies to 45 destinations in 15 African countries. The deal between Qatar Airways and Airlink was signed on August 20.
Before this, Qatar Airways on December 9, 2019, inked an investment deal with the Rwandan government to build, own, and operate the country’s new airport, with the Doha-based airline taking a 60 percent stake in the $1.3 billion (Sh167.7 billion) project.
In the past, Abu Dhabi-based Etihad Airways held 40 percent equity in Air Seychelles between 2012 and 2021, before offloading its entire stake to the government of Seychelles in the wake of the Covid-19 pandemic.
KQ’s top management remains tight-lipped about the amount of capital injection it is seeking from the strategic investor, but the mission is to cure the airline’s negative equity, which stood at Sh123.6 billion at the end of June 2024.
Higher revenues, a stronger Kenyan shilling, and the restructuring of a loan facility owed to the National Treasury helped KQ post its first half-year profit in over a decade since 2013.
The airline announced a rare profit of Sh513 million, reversing a loss of Sh21.7 billion at the same time last year as KQ continues to show its underlying profitability potential despite years of turbulence.
Savings from the restructuring of a loan facility owed to the government saw the carrier secure softer terms, while the revaluation of KQ’s external liabilities helped the airline to cut its non-operating costs by 97 percent in the six months.
