Kenya Airways CEO appeared before the committee to shed light on the ongoing process of finding a strategic investor who will give funds to help Project Kifaru which kicked off in February 2022.
Since the Covid-19 pandemic, the airline relied heavily on the taxpayers to sustain its operations which drained the airline business leading to heavy spending of taxpayers’ money to aid their operations.
During the submission, Chief Executive Officer Allan Kilavuka said the operations of wooing potential investors are underway as the board has already prepared the investment memorandum.
“The task of funding the Kifaru project as originally conceived was deemed onerous and an alternative option to achieve the same objective was considered. This led to an agreement to seek a strategic equity partner to assist in the capitalization of KQ” Mr. Kilavuka shared with the National Assembly’s Public Debt and Privatization Committee.
According to him, this will help bring the National carrier to profitability.
KQ owed local banks Sh31.4 billion, Sh58.6 billion for the case of the government, and Sh22.8 billion in respect of outstanding supplier payments.
The airline bosses said in the session chaired by the committee’s deputy chairman Kitui Central MP Makali Mulu that there were risks to the unpaid debts.
The Tsavo facility was a special purpose vehicle in the State of Delaware, USA where KQ borrowed 924 million US Dollars to procure six 787-8 aircraft and a 777-300 and an engine.
“Approximately 90 percent of this facility was provided by Citibank and JP Morgan Chase Bank and was fully guaranteed by the US Exim Bank,” Kilavuka told MPs.
“Without the debt, KQ would be posting profits,” the KQ boss said.
Makali said the aim of the committee is to establish whether KQ has a clear turnaround strategy.
“We have concluded that the debt is the problem. KQ is profitable but the challenge is the debt is part of them,” the MP said.
He backed KQ bosses’ assertions that without the debt, they will be back to profitability.
“We agree with you that if the government can take the debt, you will survive,” the MP told the KQ managers.
Makali said, “The government has accepted to take over the debt and turn around the company.”
CEO Kilavuka, submitted to the Committee that Kenya Airways reported a significant improvement in its revenue collection for the Financial Year 2021/2022. As compared to the Financial Year 2020.
He further noted that this was achieved despite fuel price increases during this period due to the Russia-Ukraine crisis and forex volatility.
“This improvement in revenue, however, was affected by the significant deterioration of the Kenya Shilling against the US Dollar, since a large proportion of our borrowing is denominated in US Dollars”, Mr. Kilavuka said.
Earlier last month, Senators trained their guns on senior officials at the national carrier over its perennial losses despite the government pumping billions of shillings in bailouts, calling for individuals culpable of the losses to be held to account.
