Kenya’s national carrier could be salvaged by the government as it moves to pump $400 million into its operations.
Kenya’s government converted some loans to Kenya Airways into equity to lift its stake to nearly 50 percent in an effort to return the carrier to profitability, the finance minister said on Monday.
The operation allows the Kenyan state to take control of nearly 50% of the capital of the company that it shares among others with the multinational Air France-KLM.
Kenya Airways posted the country’s biggest ever annual corporate loss of 26 billion shillings ($251 million) in the financial year 2016, as it reeled from a slump in travel and high financing costs after purchase of new Boeing planes.
The government, which offered contingent guarantees of $750 million for the airline’s debts, would convert $185 million of its loans into equity, while 11 local lenders would also convert part of their loans, Finance Minister Henry Rotich said.
The agreement would increase the government’s shares to 48.9 percent from 29.8 percent while banks would get a 38.1 percent stake, through a special vehicle, he said.
Last July, its leaders announced more than $250 million in losses and a debt estimated at more than $1 billion.
Kenya Airways’ financing plan for Nairobi echoes the financing needs of South African Airways, another well-established airline on the continent.