Kenya Airways (KQ, Nairobi Jomo Kenyatta) is to receive a KES20 billion shilling (USD173.9 million) bailout after the Kenyan National Assembly approved a KES138.86 billion (USD1.2 billion) supplementary budget for 2021/22.
Kenya Airways Chairman Michael Joseph said the approval of the mini-budget on March 29 paves the way for the National Treasury to release funds to Kenya Airways, enabling it to reverse 25% employee salary pay cuts, reported Business Daily.
Chief Executive Officer Allan Kilavuka told Bloomberg the bailout would probably come in the shape of a loan unless the government converted it into equity in future.
The release of the KES20 billion is to ease the loss-making national carrier's cash flow and partially pay for its restructuring. "A portion of it is to support the restructuring of the airline, in terms of renegotiating some of the terms of engagement with our suppliers; part of it is general working-capital support for the business and operational support. Part of it is to help stabilise our balance sheet," Kilavuka explained to Bloomberg.
A six-month Seabury Securities consultancy contract to help the airline cut costs, improve efficiency, and return to growth ends in September."This is the last shot at making sure that we have a concrete, measurable, realistic structure that will be successful for the airline," he said.
Besides salaries, the airline needs to settle utility bills, including electricity, security, maintenance of grounded aircraft, and parking. Business Daily reported that under the new bailout terms, Kenya Airways will be required to reduce its network, operate a smaller fleet, and possibly lay off more staff.
The airline more than halved net losses to KES15.8 billion (USD137.3 million) in 2021 from KES36.2 billion (USD314.7 million) in 2020, helped by a 33% revenue growth to KES70.221 million (USD610,581). The airline said its income would have been higher "had we not been restricted in the fourth quarter due to the Omicron variant and the ban on flights into the UAE during this time," according to its financial results for the year ending December 2021 released on March 29.
A 3.6% saving in total operating costs was achieved against 32.9% higher operating costs driven by increased operations and soaring global fuel prices. Fixed costs declined by 26.7%, thanks to a strong emphasis on reducing fleet ownership costs and overheads. Lease rentals for aircraft had been reduced by KES10 billion (USD86.9 million).
Additional revenue streams sought during the pandemic had included air charter services, which had increased by 300%, and ancillary revenues, which increased by 65%.
Kenya Airways uplifted 2.2 million passengers during the year, a 25% increase compared to 2021 but 57% lower than 2019. The cargo business uplifted 63,726 tonnes, recording an improvement of 29% over 2020.
The airline said it is pursuing several strategic initiatives that "should help to future proof the various reform efforts that the company has instituted". These included commercialising unmanned aircraft technology and electric vertical take-off-and-landing (eVTOL) aircraft, expansion of cargo, and its Maintenance and Repair Organisation (MRO) facility.
