KQ to access Sh36 billion bailout based on targets
The Ministry of Transport says the Sh36 billion loan to be disbursed to Kenya Airways in the current financial year is conditional and is only to be released to the airline in bits based on achieving set goals.
Transport Principal Secretary Joseph Njoroge said the loan has not been released in its entirety to the carrier as it’s pegged on targets that KQ, as the airline is known by its international code, has to meet.
The targets have been set by the government and are assessed by Seabury –a consultant firm that is overseeing the restructuring of KQ.
“We have set for them targets and we only release funds when they achieve those targets as advised by Seabury,” said Eng Njoroge in an interview with the Business Daily.
He did not specify the targets set for KQ which has been making losses for years. KQ tapped US-based consultant Seabury Group to advise it on financial restructuring and a revival plan amid stiff competition from other players such as Ethiopian Airlines.
Seabury has over the years been appointed by several airlines around the world including Indian international airlines Jet Airways, German air Berlin Air, and Norwegian Air Shuttle among others where it has advised them on cutting losses, increasing revenue, and restructuring their debt in some airlines.
The PS said there has been a move in the right direction in terms of KQ meeting the targets and that it is a matter of time before they revert to profitability.
KQ narrowed its net loss for the year ended December by 56.58 percent on higher revenue as travel picked up with the easing of Covid-19 restrictions.
The national carrier reported a net loss of Sh15.8 billion in the review period compared to a net loss of Sh36.2 billion the year before when travel restrictions hit operations hardest, including the grounding of its planes for months.
Some of the parameters measured under the set targets include its efficiency in operations and cabin loads among others.
The Treasury is offering Kenya Airways a further Sh36.6 billion bailout as part of efforts to prop up the national carrier amid recovery from the Covid-19 travel slump.
The allocation, contained in the 2022/2023 budget, is an addition to the Sh20 billion bailout to the airline that was approved by MPs.
This will push State support for the airline to Sh56.6 billion in under a year, making it the largest corporate bailout in Kenya.