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The government has approved KSh45.4 billion in fresh financing for Kenya Airways as efforts to stabilise the national carrier and restore its financial health continue.
The money is expected to cover urgent financial obligations, including aircraft maintenance and the return of grounded planes to service, which could help the airline improve its operational capacity.
According to the Cabinet Dispatch, the funding will be released in instalments over a repayment period of 10 years, although the government may convert it into equity after obtaining the required approvals.
As of September, three Kenya Airways aircraft were undergoing major maintenance after reaching 12 years of service, adding to the airline’s operational and financial pressures.
Government Moves to Address KQ’s Debt
In a separate decision, the Cabinet approved a proposal to restructure KSh122 billion in government loans, together with accrued interest, into a tradable instrument that could eventually be converted into shares.
The proposed arrangement is intended to strengthen the airline’s balance sheet and make it easier to attract new investors and raise capital.
However, implementation will depend on corporate, shareholder and regulatory approvals, meaning the restructuring is not yet final.
Debt Restructuring Seen as Key to Recovery
Kenya Airways has spent much of the year engaging the National Treasury over its debt restructuring plans, with the government signalling its intention to support the carrier’s long-term turnaround.
The KSh122 billion debt has also been identified as a major obstacle to attracting investment, despite reported interest from potential investors earlier in the year.
The latest financing and proposed debt conversion form part of the government’s wider plan to improve the airline’s financial position and return it to sustainable profitability.
Kenya Airways reported revenue of KSh81.25 billion for the year ended June 30, representing a 9 per cent increase, although the company continued to record net losses amid high fuel and aircraft maintenance costs.
The success of the recovery plan will depend on whether the new financing eases immediate cash pressures while the proposed debt restructuring helps create room for future investment.
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