KQ, Kenya Power To Get 37 Billion Shillings State Bailout

Struggling state-owned entities -Kenya power and Kenya Airways (KQ) will get 37.3 billion shillings in the current financial year to keep them afloat and help service their debts.

The funding is part of fiscal consolidation conditions set by the International Monetary Fund (IMF) and will see KQ receive 34.95 billion shillings and Kenya Power 2.35 billion shillings in the allocation.

“The government will continue to support KQ financially in the financial year 2022/23 to facilitate normalization of overdue payments to prevent defaults for settlement of operating lessors’ arrears and completion of payments, as well as other working capital support,” said the Treasury.

The two firms have been struggling in debt for decades with KQ reporting a loss of 9.9 billion shillings in the six months to June this year.  The recent loss is a 14 percent drop from 11.5 billion shillings in the same period last year. KQ attributed the loss to high fuel costs that saw the airline spend 11 billion shillings.

Total operational costs were at a five-year high of 57 billion shillings compared to 56 billion shillings in 2017. KQ had by September already received 10 billion shillings from the Treasury to help service its debts. The Treasury says the bailouts to KQ are already bearing fruit adding that the airline would have turned a profit should fuel prices remained favorable.

The airline has initiated some measures to curb losses while improving services. It is planning to halt its services in 12 loss-making routes and has already retired flights to 16 destinations globally.

The carrier will also reduce its fleet size by terminating some aircraft leases and eye negotiations with operating lessors to cut its annual lease costs. The airline is also betting on cutting operation costs, a move that will see it lay off some of its staff, and reduce distribution, ticketing, procurement, fuel, and maintenance costs.

On the other hand, Kenya power will use the 2.35 billion shillings bailout to address the liquidity gap left by the reduction of electricity tariffs in January.