The Government Clears Over 50% of the Guaranteed Loan
The Kenyan government has paid US$47 million (R901 million) towards Kenya Airways’ debt during the fourth quarter of 2023, clearing over 50% of the national carrier’s guaranteed loan. The loan was taken from the US Export-Import Bank in 2017, as part of a strategy to restructure the airline and improve its financial performance.
The loan was guaranteed by the Kenyan government, which agreed to take over part of the airline’s debt in exchange for a 48.9% stake in the company. The government also appointed a new board of directors and a new chief executive officer for the airline, with the aim of turning it around and making it profitable.
According to the businessdailyafrica.com, the government has paid approximately $370 million (R7,09 billion) of the $482 million (R9,24 billion) loan over the past year, leaving a balance of $112 million (R2,15 billion) to be cleared by 2025. The government has also committed to provide full operational and financial support to the airline, and to participate in future financing activities when required.
The Airline Faces Challenges Amid the Pandemic
Despite the government’s efforts, Kenya Airways has faced several challenges amid the COVID-19 pandemic, which has disrupted the global travel and tourism industry. The airline has reported losses of $330 million (R6,32 billion) in 2020 and $132 million (R2,53 billion) in the first half of 2021, due to reduced passenger and cargo traffic, increased operating costs, and currency fluctuations.
The airline has also faced competition from other regional and international carriers, such as Ethiopian Airlines, Emirates, and Qatar Airways, which have expanded their presence and market share in Africa. The airline has also faced regulatory hurdles and legal disputes, such as the suspension of its flights to the UK and South Africa, and the court case against the Kenya Airports Authority over the ownership of the Jomo Kenyatta International Airport.
The airline has taken several measures to cope with the challenges, such as reducing its workforce, renegotiating its contracts, optimizing its routes, and enhancing its safety and hygiene protocols. The airline has also diversified its revenue streams, such as launching a cargo subsidiary, offering charter flights, and partnering with other airlines and travel agencies.
The Airline Pursues a Recovery Strategy
Kenya Airways has developed a recovery strategy, which is still under review by the government and other stakeholders, to revive its operations and regain its competitiveness. The strategy involves a comprehensive restructuring of the airline, which includes a change of ownership, a debt-to-equity conversion, a capital injection, and a nationalization plan.
The strategy also involves a transformation of the airline’s business model, which includes a focus on customer experience, digital innovation, sustainability, and social responsibility. The strategy also involves a repositioning of the airline’s brand, which includes a new vision, mission, values, and identity.
The airline hopes to achieve its recovery goals by 2025, which include achieving cash flow break-even, increasing its market share, improving its customer satisfaction, and reducing its environmental impact. The airline also hopes to become the leading carrier in Africa, and to contribute to the economic and social development of Kenya and the region.
