Treasury to end Kenya Airways bailouts by DecemberThursday January 19 2023
The government is pledging to develop a financing plan that will see it stop using taxpayers’ money to support the operations of the loss-making Kenya Airways (KQ) by the end of December 2023.
National Treasury has disclosed the plan, without giving details, in the draft 2023 Budget Policy Statement released Wednesday evening.
“To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways,” said Treasury in the document.
“A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023.”
The plan, if implemented, could save taxpayers billions of shillings spent annually to keep afloat the national carrier that last returned a profit in 2012.
President William Ruto had earlier indicated that the State was looking for a strategic investor to buy a controlling stake in KQ as a path of weaning it off debts and subsidies and setting it on a growth path.
Transport Cabinet Secretary Kipchumba Murkomen said mid-December, the search for strategic partners for KQ topped the list of Dr Ruto’s mission to Washington during the US-Africa summit.
“We are doing everything possible to ensure that we no longer subsidise the airline and that is why we are looking for a strategic partner,” said Mr Murkomen then.
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KQ was allocated Sh36.6 billion in the current financial year, mainly for its re-organisation, as part of the State’s strategic investments in public enterprises.
The allocation brought the amount injected into the national carrier to Sh63.2 billion, given that it had been awarded Sh26.6 billion in the previous financial year.
The government has, between 2016 and 2020, loaned KQ at least Sh35 billion, bringing the total loans to the airline to about Sh98.2 billion.
Read: Taxpayers to take over Sh59.7 billion KQ loans
The International Monetary Fund (IMF) last year disclosed that the airline’s guaranteed and unguaranteed loan amounting to $868.7 million (Sh107.8 billion) as of March 2022 “are expected to be serviced by government and discussions are ongoing with Kenya Airways’ creditors.”
The government had also told IMF that it would offer the airline $473 million (Sh58.7 billion) as direct budgetary support to clear overdue payment obligations and cover the upfront costs of restructuring.
The IMF disclosures mean that taxpayers are on course to spend more money to sustain the airline’s operations, which was listed on Nairobi bourse in 1996.