Kenya Airways to Get $1.2 Billion In Bailout Cash from Kenya’s Treasury Department in Bid to Revive the Ailing Carrier
Kenya’s national carrier Kenya Airways (KQ) will receive a bailout of nearly $1.2 billion from the Kenyan government. The move was announced by the cabinet secretary in charge of finance Ukur Yatani.
The bailout is designed to help the ailing carrier which is plagued by massive debts and reduced operational capacity due to the global COVID 19 pandemic. The decision also appears to suggest that the Kenyan government is backing away from the initial plan of fully nationalizing the carrier.
The Modalities of the Bailout
It was not clear when the new monies will start flowing in. However, a statement released by the Treasury noted that the government will take over much of KQ debt. At the moment, the carrier owes nearly $900 million to suppliers.
Also, the government will commit around $500 million in budgetary support for Kenya Airways each year. The money is expected to help with airplane maintenance, especially grounded jets that can’t fly due to air travel restrictions. There was however no mention of how long this financial support will last. At the moment, budgetary assistance is for two years. But renewal plans are of course possible.
Impact of Covid 19 on KQ
Kenya Airways has struggled a lot over the past decade or so. The airline, which was once considered one of the best in Africa, has declined. Even though it is still up there with Africa’s elite, experts argue that other carriers like Ethiopian Airways are leading the way.
The COVID 19 pandemic couldn’t have come at a worse time for KQ. With the global air travel restrictions, the Kenyan national carrier has had to ground most of its new high-capacity planes.
For a company that is already drowning in debt, loss of operating income is a huge blow. With no end in sight as far as COIVD 19 goes, it would take a lot of effort for KQ to fully recover.
The Bailout is not Unusual
It’s not unusual for governments to bail out airlines. In fact, during the COVID 19 pandemic, both national and private carriers have received extensive government support around the world. The United States for example has provided billions of dollars to the airline industry to help cushion the blow of the COVID pandemic.
The move by the Kenyan government is likely going to have significant public support. KQ is after all one of the most beloved companies in Kenya. Also, without government money, the losses would have easily accrued over time, making it virtually impossible for Kenya Airways to recover.
Resumption of Global Air Travel
It is not clear when global air travel will resume in full force. Fresh fears over the spread of the Omicron virus have led to far-reaching travel bans across the world.
This has halted the small recovery airlines were making. As a result, KQ is feeling the hard hit. The hope right now though is that air travel starts again next year.
Source: Wikipedia Commons