Editorials

Solid plans needed in Kenya Airways' revival

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Kenya Airways plane at the Jomo Kenyatta International Airport. FILE PHOTO | LUCY WANJIRU | NMG

The lack of a solid rescue plan for Kenya Airways has only compounded its financial distress, causing taxpayers further losses and making the airline less attractive to investors and suppliers.

KQ has been a perennial beneficiary of State bailouts, but there appears to be no clear plan of action to revive it.

Now the Exim Bank of the US has handed the Treasury a default notice for delayed payment of a Sh57.8 billion loan the government guaranteed KQ.

Chris Kiptoo, Treasury PS, says there is not enough headroom to pay the debt while acknowledging that “what is important is to pay”.

The KQ loan was a 12-year facility initially provided by Citi Bank and JP Morgan before the US Private Export Funding Corporation took it over as Exim and the government joined in as guarantors.

Various proposals have been made to restructure KQ, from nationalising to merging with South Africa Airways to finding a strategic investor. But the government is yet to disclose what the plan entails.

Dr Kiptoo told Parliament that the government has been undertaking a KQ restructuring dubbed Project Kifaru, which has cost taxpayers Sh16.3 billion to date.

There is a need to disclose what these funds have been used for, seeing that the carrier is still expected to receive another Sh35 billion in the current financial year, with some of it being used to repay its debts.

Allowing the carrier to continue on this bailout path will cost taxpayers dearly.

If the airline, despite its strategic significance, cannot be revived, the government may as well cut its losses instead of pursuing an indefinite rescue plan.