Time for State to cut its losses at Kenya Airways

When the country starts servicing Kenya Airways loans, there is an urgent need for the government to cut its losses to the national carrier.

The loss-making airline was kept alive thanks to government bailouts, and the government was forced to settle Kshs 61.3 billion in loans that KQ had guaranteed.

The carrier reported a loss of Sh38.3 billion in the year to December, more than double losses of Sh15.9 billion in the previous year.

It is clear that decisive and drastic action is required to restore Kenya Airways to its former glory as it has been the employer of choice and darling of investors on the Nairobi Stock Exchange with the help of its steady earnings.

The sensible path would be to quickly put KQ into private hands. Currently, the state owns 48.9 percent of the national carrier while the debt-to-equity lenders own a 38 percent stake and Air France-KLM owns 7.76 percent.

The lenders and the Franco-Dutch carrier have been remarkably silent amid the crisis while the government appears to be reacting and does not appear to have a roadmap for getting the airline back.

KQ urgently requires a strategic investor to return the struggling airline to profitability.

Preferably, this is a cash-rich foreign airline in a scheme that can offer the national carrier’s flying expertise and reduce its reliance on treasury for operating cash.

Therefore, a turnaround strategy centered on a strategic investor should be a priority in the pursuit of a viable and competitive company.

The airline has promised to select a financial advisor by December as part of the investor-finding process.

In short, the state and KQ must stick to the schedule to give up a stake in the loss-making carrier.