Time for State to cut its losses at Kenya Airways


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

As the State starts servicing Kenya Airways loans, there is an urgent need for the government to cut its losses at the national carrier.

The loss-making airline has been surviving on State bailouts, and forced the government to settle loans worth Sh61.3 billion it had guaranteed KQ.

The carrier reported a loss of Sh38.3 billion in the year through December, more than double the loss of Sh15.9 billion a year earlier.

It is clear that decisive and radical action is needed to return Kenya Airways to its former glory where it was a preferred employer and darling of investors at the Nairobi bourse aided by its steady dividend pay.

The plausible route lies in swiftly placing KQ in private hands. Presently, the State owns 48.9 percent of the national carrier while lenders who converted their debt to equity have a 38 per cent stake and Air France-KLM has 7.76 per cent interest.

The lenders and the Franco-Dutch carrier have maintained marked silence amid the crisis while the government is seemingly reactive and looks not to have a roadmap for the recovery of the airline.

KQ urgently requires a strategic investor to return the struggling airline to profitability.

This preferably should be a cash-rich foreign airline in a plan that could offer the national carrier aviation expertise and cut its reliance on the Treasury for operational cash.

Therefore, a turnaround strategy anchored on a strategic investor must be a priority in the pursuit of a viable and competitive corporation.

The airline promised to select a financial adviser by December as part of the process to find the investor.

In sum, the State and KQ must stick to the timetable on ceding a stake in the loss-making carrier.