Kenya Airways seeks to raise as much as $1.5 billion capital

Kenya Airways Plc now seeks to raise as much as $1.5 billion in fresh capital in a restructuring process authorities say will revive the carrier and plug a drain on state resources.

KQ — as the airline is also known — has in the past relied on the National Treasury to repay loans and for operational costs. It didn’t receive direct government support in the past year, according to Chief Executive Officer Allan Kilavuka. Two years ago, the company estimated restructuring would cost $1 billion.

“If the government could, they would already have given that funding because they believe in the strategic importance of the airline,” he said of the needed injection. “They will not be doing that because of the stretched fiscal position. We are looking for an airline that will complement us. We have no specific preferences in terms of origin, but we are talking to a wide range of them.”

The carrier expects to pick a strategic investor this year, Kilavuka said after reporting the first operating profit in six years and narrowing the annual loss by 41%. 

Brink of Collapse

KQ has been on the brink of collapse for years. In 2017, Kenya’s government and local lenders agreed on a debt-for-equity swap that gave the state a 48.9% controlling stake. The company now needs to return to profitability to effectively compete with rivals springing up in the region.

Kenya’s government repaid 6.9 billion shillings ($52.4 million) in the final quarter of last year in guaranteed debt on behalf of the airline, in which it holds a  stake. 

While the carrier can now run without direct funding from the government, Kilavuka said, that would limit its ability to scale. “Yes we can survive in this way, but it is not a very sustainable manner to survive,” he added.

KQ has $10 million revenue trapped in Nigeria, Burundi, Ethiopia and Malawi, which are struggling with supply of foreign exchange. “For Nigeria, that matter is resolving, we’re able to repatriate some,” Kilavuka said. “For the other countries, it is still slow.”