Members of Parliament have ordered the national carrier, Kenya Airways, to draw up a fresh recovery plan that will also show how taxpayers will recover billions of shillings spent over the years to keep the airline afloat.
The Debt and Privatisation Committee of the National Assembly gave the national carrier a one-month deadline to submit the report. This (deadline) will be upon adoption of the directive by lawmakers.
Kenya Airways has over the years been heavily leaning on taxpayers for bailouts to pay loans and fund operations, with the expenditure crossing the Sh100 billion mark in four years.
The airline remains in the red financially even as it narrowed losses to Sh22.6 billion in the year ended December, down from Sh38.2 billion a year earlier.
“Within 30 days of the adoption of this report, Kenya Airways PLC should submit to the National Assembly, a realistic and comprehensive report on its turn-around strategy and measures in place to replenish the public resources utilised in the payment of the guaranteed debt, cash bailouts, and expenses relating to the debt assumed by the National Assembly,” says the committee.
Demands for a fresh strategic plan come as KQ pursues a potential strategic investor while the government is also keen to dispose of the airline in a bid to end reliance on taxpayers for handouts. The National Treasury spent Sh17.4 billion between July last year and March to service a debt that it had guaranteed KQ from a US lender. This is in addition to Sh83.1 billion spent on the loan and capital injection to the airline between July 2020 and June last year.
KQ tapped a $641.49 million (Sh83.41 billion) 12-year-loan from Citi Bank and JP Morgan in 2017, before the Private Export Funding Corporation of the US (Pefco) took it over, with the US Exim Bank and the National Treasury joining as guarantors.
Kenya Airways took up the loan to finance purchase of seven aircraft and an engine but failed to fully service the debt due to cash flow challenges linked to disruptions blamed on Covid-19 pandemic. The Treasury’s guarantee covered $525 million (Sh68.3 million), which is now being serviced fully until maturity by the taxpayer after the government converted the guarantee to external commercial public debt.
A string of losses has forced KQ to cling on to the Treasury for financial support in a bid to remain afloat, bailouts that have attracted criticism even as the government mulls a way out for the airlines.
The National Treasury had earlier told the International Monetary Fund (IMF) that it expected KQ to get a strategic investor by the end of June 2024.
