Kenya Airways asks government to settle $250 million debt

Kenya Airways Plc is counting on the government to settle $250 million in liabilities racked up during coronavirus groundings as it gears up to around two-thirds of normal capacity next year.

Discussions on the matter are underway with the National Treasury, which has previously guaranteed $750 million of Kenya Airways debt, Chief Executive Officer Allan Kilavuka said in an interview Thursday. Creditors include aircraft-leasing firms and technical suppliers.

Kenya owns 48.9% of the airline and is in the process of nationalizing it after years of losses even before the pandemic. Kilavuka said that wiping out the additional liabilities will help him execute the recovery strategy and cost-cutting plan the carrier is devising with London-based consultants Steer Group.

“What we are focusing on is to have the least-cost actions to the shareholder,” the CEO said. “That is what the strategy is going to focus on, that we are right sized, we have the least possible cost, and that we have the best possible productivity from the assets and from our employees.”

Kenya Airways recently completed International Monetary Fund evaluations intended to inform the turnround plan and minimize expenses to the exchequer while ensuring the delivery of key restructuring milestones.

KQ, as it is known, sees capacity returning to 65% of pre-virus levels in 2022 from 55% now as travel-curbs ease, Kilavuka said. Domestic routes are back to 80% of normal levels, with the figure set to reach 90% by the year’s end.

The CEO said there’ll be no rush to add routes in the near term after the company suspended seven last year to preserve cash.

“We have made a commitment that we will be very deliberate in making sure that we don’t reopen routes that are going to be bleeding,” Kilavuka said.