KQ seeks State bailout, amid restructuring bid
By Seth Onyango and Bernice Mbugua
Kenya Airways (KQ) is eying a multi-billing-shilling bailout package from the exchequer to stay afloat as talks to nationalise it gather momentum.
On Monday, KQ will meet with Treasury amid fears that taxpayers risk losing Sh75 billion to its creditors, if an urgent stop-gap deal is not inked to avert the turbulence.
To keep the loss-making airline in the skies, chairman Michael Joseph revealed it needed Sh45 billion.
“Give me $450 million (Sh45 billion) and that is what I need…then we do not need to go through this charade of nationalisation. We will have enough resources to grow and change the future of the airline,” he said during a local TV interview on Wednesday.
And appearing before the National Assembly Transport Committee yesterday, Joseph warned the airline faced imminent collapse if plans to restructure it are not in place in six months.
“If we do not restructure, we are in danger of KQ no longer being a strategic asset of this country…we are going to have to consider very unpleasant measures,” he cautioned.
In September, KQ withdrew the Privately Initiated Investment Proposal (PIIP) as part of its turnaround strategy before Members of Parliament threw cold ice on it.
It had also sought to establish a holding company which would host four subsidiaries comprising Kenya Airports Authority (KAA), Kenya Airways (KQ), Jomo Kenyatta International Airport (JKIA), and a centralised aviation college.
Yesterday, Joseph disclosed the airline was under immense financial squeeze, as investors and creditors adopted a wait-and-see approach on the bid to communise it. “KQ’s current financial situation is quite critical and if we know there is going to be a timeline, then we can proceed with some form of planning but right now, we have no timeline, we do not know when this process (nationalisation) is going to end. We have seen the result of the PIIP which was abandoned,” he said.
It comes as the Employment and Labour Relations Court allowed KQ to hire 20 local pilots on contract to guarantee the airline’s flight schedule completion over the next two years. Transport committee chairman David Pkosing tasked the Ministry of Transport to make urgent interventions to ensure the national carrier does not collapse citing cost to the taxpayer.
“The government and the people of Kenya are the only ones who stand to lose should KQ collapse because creditors enjoy a sovereign guarantee of Sh75 billion. Therefore, they do not care,” he said.
The sovereign guarantee was offered by Parliament in 2017 to creditors to help the heavily-indebted carrier secure financing from other sources for its recovery.
On nationalisation and delisting of the carrier, Transport Principal secretary Esther Koimett assured the government will by December 20 have appointed a transaction expert to draw up an implementation plan with clear timelines.
KQ, which is 48.9 per cent State-owned and 7.8 per cent held by Air France-KLM, has been struggling to return to profitability and growth.
A failed expansion drive and a slump in air travel forced the airline to restructure Sh200 billion ($2 billion) of debt in 2017.