Kenya Airways (KQ, Nairobi Jomo Kenyatta) is seeking to recover more than KES1.5 billion shillings (USD11.6 million) being withheld in Ethiopia due to foreign exchange restrictions in that country, according to CEO Allan Kilavuka.

He told Business Daily Africa that Kenya and Ethiopia were negotiating to ease these restrictions, as the funds in Ethiopian banks are losing value through a 30% drop in the Ethiopian birr against the US dollar.

"We have significant amounts of blocked funds. We have USD12 million, which is blocked, and we cannot use it because it is stuck across restricted countries," Kilavuka said in the interview. "That is our problem because, like now in Ethiopia, our money has been significantly devalued and there is nothing we can do about it. In such markets, we are trying to sell more in US dollars as a natural hedge, and unfortunately again, because of the forex regime, you cannot always do that."

Ethiopia has faced chronic foreign currency shortages and inflation, exacerbated by recent devaluations and a transition to a more flexible exchange rate system supported by an International Monetary Fund loan. This shift is aimed at stabilising the economy and improving forex availability.

Kenya Airways, which earns nearly half of its revenue from African routes, has faced similar issues in Nigeria, where currency restrictions were eased last year. "Nigeria has improved, to be fair, because once they liberalised we were able to remove our money," Kilavuka said.

Despite these challenges, Kenya Airways recently reported its first half-year profit in over a decade, driven by increased passenger numbers and reduced debt costs. For the six months ending June 2024, it achieved a profit of KES513 million (USD4 million), reversing a KES21.7 billion (USD168.3 million) in the same period in 2023.

The Kenyan government assumed Kenya Airways' USD641 million loan from US Exim Bank, restructuring the debt so the carrier could repay it over a longer period in local currency. This restructuring significantly reduced the airline's other expenses from KES22.8 billion (USD177 million) to KES687 million (USD5.3 million). Revenue increased by 22% to KES91.4 billion (USD708.7 million), supported by a 10% rise in passenger numbers.

Kilavuka said the airline was optimistic about breaking even for the full year and was actively negotiating with a strategic equity investor but gave no further insight.