Kenya’s ailing national carrier Kenya Airways is set to received $240 million in loans from the government and the African Export-Import Bank (Afreximbank), Reuters reported.
The carrier, which has been sinking deeper into losses for the last three years, will get $40 million from one of its major shareholders, the Kenyan government, and a $200 million bridging loan from Afreximbank, Kenya’s Finance Minister, Henry Rotich, told a senate committee.
Rotich said the government loan will help the airline meet its operational requirements and pay off suppliers.
“This short term facility will be received in two tranches of $100 million each,” Reuters quoted Rotich telling a Kenyan senate committee at the Kenyan senate on Tuesday.
“Once the long-term capital requirements are firmed up based on the approved turnaround plan, the government in consultation with other shareholders will review its options, including equity injection and/or loan guarantees,” he added.
In July, after Kenya airways announced a $298 million loss, Rotich said the company will need anything between $500 to $600 million bailout to survive the shock. A Nairobi-based investment firm, Standard Investment Bank (SIB), put the bailout figure at about $1 billion.
SIB also said the airline, that has been spending heavily on a new fleet of planes, also needed to significantly scale down its operations in order to cut costs and return to profitability.
The Airline hired New York-based turnaround consultant Seabury to help it restructure its operation and lift it from a string loss making years.
It said last week that is has put in motion plans to sell off four Boieng B777-200s, which were acquired from the manufacturer between 2004 and 2007. A new B777 currently sells at between $260 million and $290 million, but a ten-year old one, though still new, may fetch much less.
Plans to deliver a pair of Boeing 787 have been put on ice as Kenya Airways’ financial woes grow.
The two North Charleston-made 787 Dreamlners that are supposed to be delivered to Kenya Airways have been put in “temporary storage” as the carrier attempt to work through its financial problems that could spell its demise, The Post and Courier reported.
The market for used airlines has softened in recent months as the slowdown in the Chinese economy affect investors, eTN reported.
Kenya airways was privatized in 1996 and is partly owned by AirFrance-KLM. For years it has been used as the best example of good privatization in Africa, where most state-owned airlines have collapsed due to heavy government involvement.
Rotich told the senate the airline will let go some of the airline’s top management and board members for complicity and may consider terminating a long running agreement with KLM in its drastic plan to return to profitability.
