Kenya Airways’s pilot shortage getting serious in its peak season
By Soko Directory Team / July 31, 2017 | 11:25 am
Following Kenya Airways’ operational disruption that began on Saturday affecting hundreds of passenger due to a pilot shortage, the crisis is set to continue.
“We are running in the peak season and unfortunately have two unexpected mishaps,” said Jan De Vegt, Chief Operating Officer, Kenya Airways.
“One of our aircraft was damaged during an accident at JKIA recently.This aircraft is now grounded. Net to that we are experiencing some shortages of pilots,” he added in a statement sent to the media.
On monday,it cancelled flights to to Kigali, Harare, Kinshasa, Lilongwe, Lusaka and Comoro.
“The situation has our full attention and we are doing everything we can to get our schedules back to normal,” says Vegt.
The airline’s directors have called for an Extraordinary General Meeting (EGM) to pass resolutions to allow for a balance sheet restructuring and a subsequent capital raise in August.
KQ’s full-year results had an operating profit of Kshs 900 million, an improvement from an operating loss of Kshs 4.1 billion the year before.
During the period, it flew 4.5 million passengers, an increase of 5 percent, to 53 destination, but had an 8 percent dip in revenue to Kshs 106 billion, due to the reduced fleet capacity.
The airline plans to reduce its current debt exposure of Kshs 242.0 bn by Kshs 60.5 bn through conversion to equity at a price of Kshs 2.1 per share, which will result in a 95.0 percent dilution effect to the existing shareholders. The table below shows the transaction details for the debt restructuring.
This is part of the airline’s turnaround strategy, ‘Operation Pride’ continues to focus on three main priorities – returning to profitability through revenue enhancement and cost containment, refocusing and resizing the business and model, and enhancing partnerships, as well as restructuring the capital of the company.
Following the restructuring, KQ Lenders Company, a special purpose vehicle (SPV) consisting of 11 Kenyan banks will replace KLM as the second largest shareholder with a holding of 35.7 percent, while the Government’s holding will increase to 46.5 percent from the current 29.8 percent.
Other shareholders will be given an opportunity to reinvest in the company through an open offer to raise up to Kshs 1.5 bn through an issue of new Ordinary Shares in order to defend their stakes against the significant 95.0% dilution.
Analysts view the conversion as positive.
“ It will boost the firm’s equity position to a positive of approximately Kshs 15.6 bn, from the current negative position of Kshs 44.9 bn, it will reduce the overall debt burden, thus stabilizing the company and facilitating long term growth, in line with its turnaround strategy, and it will result in a significant boost in liquidity through savings on interest and maturity payments on debt, thus improving the airline’s cash flow position,” according to Cytonn.
“Assuming Success, the transaction will pull equity above negative to KES 11.8Bn. Despite the massive dilution, we are of the view that this is a necessary step bearing in mind that currently all shareholders own a stake worth zero in KQ,” says Gerald Muriuki from Genghis Capital.
However, “The airline has indicated that there is no alternative to this transaction and if it will not be executed, then operations cannot be sustained as a going concern and insolvency proceedings will begin. If this is the case, then, the company will be delisted, shareholders will be left with nothing, unsecured creditors both government and banks will also be left with nothing, as the assets of the company have been charged to the benefit of secured lenders,” adds Muriuki.
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