Govt To Drop KQ Multi-Billion Bailouts By December

By Jane Muia / Published January 20, 2023 | 8:52 am

KEY TAKEAWAYS

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 further tabled an additional State bailout of 34.95 billion shillings for the carrier in the 2022/23 supplementary budget to repay its debts.

The National Treasury has unveiled plans to wipe out multi-billion bailouts on Kenya Airways (KQ) by December 2023.

In the Draft 2023/24 Budget Policy Statement, Treasury CS Njuguna Ndung’u said the government will instead come out with a strategy that will bring the National carrier back to profitability.

“A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023,” he said.

KQ has been struggling with debt for decades. The national carrier reported a loss of 9.9 billion shillings in the six months to June last year. The recent loss is a 14 percent drop from 11.5 billion shillings in the same period in 2021. KQ attributed the loss to high fuel costs that saw the airline spend 11 billion shillings.

The Treasury further tabled an additional State bailout of 34.95 billion shillings for the carrier in the 2022/23 supplementary budget to repay its debts.

President William Ruto announced government plans to sell its entire 48.9 percent stake in Kenya Airways to Delta Air Lines in December last year as a path of returning the struggling airline to profitability.

“The government is looking for partnerships that will make Kenya Airways a profitable entity whatever that means, in whatever configuration, whatever form it takes,” Ruto said adding that discussions with Delta are at a preliminary stage.

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.