MPs have ordered national carrier, Kenya Airways to draw up a fresh recovery plan that will also show how taxpayers will recover billions of shillings spent over the years to keep the airlines afloat.
The Debt and Privatisation Committee of the National Assembly gave KQ a one-month deadline to submit the report. This (deadline) will be upon adoption of the directive by lawmakers.
Kenya Airways has over the years been heavily relying on taxpayers for bailouts to pay loans and fund operations, with the expenditure crossing the Sh100 billion mark in four years.
The airline is in the red financially even as it narrowed losses to Sh22.6 billion in the year ended December, down from Sh38.2 billion a year earlier.
“Within 30 days of the adoption of this report, Kenya Airways PLC should submit to the National Assembly, a realistic and comprehensive report on its turn-around strategy and measures in place to replenish the public resources utilised in the payment of the guaranteed debt, cash bailouts, and expenses relating to the debt assumed by the National Assembly,” the committee says.
Demands for a fresh strategic plan come as KQ pursues a potential strategic investor while the government is also keen to privatize the airline in a bid to end reliance on taxpayers for bailouts.
The National Treasury spent Sh17.4 billion between July last year and March to service a debt that it had guaranteed KQ from a US lender. This is in addition to Sh83.1 billion spent on the loan and capital injection to the airlines between July 2020 and June last year. KQ tapped a $641.49 million (Sh83.41billion) 12-year-loan from Citi Bank and JP Morgan in 2017, before the Private Export Funding Corporation of the US (Pefco) took it over, with the US Exim Bank and the National Treasury joining as guarantors.
Kenya Airways took up the loan to finance the purchase of seven aircraft and an engine but failed to fully service the debt due to cash flow challenges linked to disruptions linked to the Covid-19 pandemic. The Treasury’s guarantee covered $525 million (Sh68.3 million), which is now being serviced fully until maturity by the taxpayer after the government converted the guarantee to external commercial public debt.
A string of losses has forced KQ to cling on to the Treasury for financial support bailouts that have attracted criticism even as the government mulls a way out for the airlines.
The National Treasury had earlier told the International Monetary Fund (IMF) that it expected KQ to get a strategic investor by the end of June 2024.
Concurrently, the government is also mulling the privatisation of KQ by merging it with other target companies and setting up a fund to manage them.
It remains unclear on the progress or lack of it on the two proposals.
