•Joseph says the airline needs to get rid of debt first before returning to profitability
•KQ reported a Sh8.6 billion net loss for the six months to June 30 on account of increased operational costs
Kenya Airways chairman Michael Joseph says the airline would need up to $450 million (Sh45 billion) to get operations back to profitability.
Speaking in New York, Joseph expressed his frustrations with regards to the state’s reluctance to act on the national carrier’s recovery as it a national asset.
“We need to get rid of the debt at KQ to get a turnaround. A better balance sheet can aid in replacing aging aircraft,” he said.
He said the cash injection would steer the airline away from the nationalisation process while providing enough resources to grow and improve KQ’s operations.
“Then we don’t have to go through this charade,” he said.
Kenya Airways reported a Sh8.6 billion net loss for the six months to June 30, more than double the loss reported over the same period in 2019.
According to the listed airline, this was on account of a 15.6 per cent jump in total operating costs to sh61.5 billion up from Sh53.2 billion as two Boeing 787s that had been sub-leased to Oman Air were returned and fuel costs marginally increased by five per cent due to increased flying.
KQ is funded by a consortium of banks holding shares as KQ Lenders Company with 38.1 per cent shares in the company, government 48 per cent, KLM (7.8 per cent), minority shareholders (2.8 per cent), and KQ employees (2.4 per cent).
KQ owes CBA group Sh3.1 billion, NIC bank Sh2.1 billion, Equity Bank Sh5.2 billion, National Bank Sh3.5 billion, Co-operative Bank Sh3.3 billion, KCB Sh2.1 billion and a similar amount to DTB.
“The plan was to originally get $100 million (Sh10 billion) capital injection but that didn’t happen. This is the legacy that we inherited and now we have to grow from there,” Joseph said.
He said if the state is not careful, East Africa’s gateway will move from Nairobi to Kigali.
During the interview, outgoing CEO Sebastian Mikosz also expressed his frustrations with the government for allowing political interference and lack of knowledge on the industry, which according to him poured cold water on the Privately Initiated Investment Proposal (PIIP).
“It’s frustrating how the government is reluctant to act on anything …and as every one knows I am very impatient and I need this turnaround to have been done by yesterday,” he said.
In May, the Treasury wrote-off Sh24 billion loan it owed the consortium of lenders, a move that came barely a month after the government secured Sh20 billion to help KQ repay another loan it borrowed from African Export-Import Bank (AfreximBank) two years ago.
Mikosz, who joined KQ in 2017 after serving as Polish Airlines CEO will step down from the troubled state airline at the end of the year, five months before the end of his three-year contract.
“It is going to be difficult to replace Mikosz. There is not a lot of people in the pool from which to pick a replacement for this kind of job,” Joseph said.
Despite its woes, KQ received the prestigious African Airlines Association (AFRAA) Airline of the Year Award for Best Improved in Intra-Africa Connectivity.
According to AFRAA, the award recognized Kenya Airways for its remarkable contribution to intra-Africa connectivity through opening up the highest number of intra African routes within AFRAA membership in 2018.