Budget 2022/23: Yatani proposes KQ restructuring to cut costs

KQ has failed to record a profit since 2014.

by The Star

Eastern07 April 2022 - 18:05

In Summary

•KQ plays a major role in economic development but since 2014, it has failed to record a profit.

•It will have to operate a smaller fleet. It has accumulated huge debts as the airline took on buying a fleet of new Boeing planes, pushing it into negative equity territory.

Treasury CS Ukur Yattani pose for a photo with the budget briefcase at Treasury Building Nairobi before proceeding to parliament on Thursday 7 April 2022.

National Treasury Cabinet Secretary Ukur Yatani on Thursday proposed several measures for Kenya Airways to meet its restructuring costs.

The move comes at a time when the airline faces severe cash-flow constraints following global lockdowns triggered by the COVID-19 pandemic.

Apart from putting in place a number of measures in the last two years to remain afloat, including downsizing its staff, the CS proposed a number of steps the airline should take in its bid to bounce back to profit.

FILE IMAGE: Kenya Airways planes at JKIA.

They include:

Trimming of its 32 network
Rationalization of frequencies of flights.
Operating a smaller fleet.
Rationalize its staff complement.

Kenya Airways plays a major and catalytic role in the economic development of this country but since 2014, it has failed to record a profit.

The losses have compounded the huge debts the airline took to buy a fleet of new Boeing planes, pushing it into negative equity territory.

Its total assets are currently valued at Sh155.5 billion against a total liability (non-current and current liabilities) of Sh157.9 billion.

KQ now depends on the government for a bailout.

Last year, the National Treasury committed to bailing out the airline after shelving plans to nationalize it.

According to a plan presented to the International Monetary Fund (IMF) last year, the exchequer said it was helping the airline source for reputable consultants to come up with a viable turnaround plan.

The Kenyan government agreed to assume $827.4 million of KQ's debt and provide financial support in FY2022 and FY2023.

In February, KQ said it will for the second time work with Seabury Consulting, a subsidiary of professional services giant Accenture to reorganize the company.

The consultancy firm will spearhead Kenya Airways' debt restructuring, which is estimated to cost upwards of $1 billion.

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