Kenya Airways Seeks State Takeover of Government-Guaranteed Debt

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Kenya Airways Plc‘s head said the government should step in to repay $750 million of state-guaranteed debt to help the East African carrier emerge from the Covid-19 crisis that has battered the industry.

The airline is scheduled to resume repayments of the sovereign-backed debt next month, following a moratorium negotiated with lenders following the grounding of most international travel a year ago, Chief Executive Officer Allan Kilavuka said Friday in an interview.

“The bigger discussion though is how do you actually restructure that debt,” he said in Nairobi. “For us to do that we need government support, because as you know they have guaranteed quite a lot of our debt. There is a discussion around that.”

The government, which holds a 48.9% stake in Kenya Airways, is in the process of fully nationalizing the company under a proposed law that will have units including the Kenya Airports Authority put under a holding entity. The carrier awarded London-based Steer Group a contract to review its turnaround strategy after years of losses were exacerbated by the coronavirus pandemic.

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Kenya Airways plans to grow the passenger revenue it generates from charter flights fivefold to 10% by the end of this year, and has began a new unit to operate drones, Kilavuka said.

“The good thing with charters is that the margins are better and they are more predictable,” he said. “We have noticed that business people are now more careful about travel so some of them would prefer to do charters.”

Kenya Airways has also began piloting unmanned aerial vehicles through a unit known as Fahari Aviation, to cater for surveillance and emergency response among other uses, Kilavuka said.

The service has been used by Kenya Wildlife Service to conduct a census at a national park and by Kenya Electricity Generating Co. to inspect turbines at a power plant, he said. The service will need a budget of $1 million to be fully-functional, Kilavuka said.

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