Kenya Airways nationalisation – the government needs very deep pockets

TAXPAYERS TO FOOT MASSIVE BILL IF NATIONALISATION GOES THROUGH AS KENYA AIRWAYS LOSSES ACCELERATE

(Posted 30th August 2020)

The first half of the current calendar year has seen the financial situation of Kenya Airways deteriorate further, as the operational as well as COVID19 induced losses during the period reached a reported 143 million US Dollars. Passengers flow too went down to just over 1 million, compared to the same period last year when the airline uplifted over 2.4 million passengers – and still made a loss then.

The airline resumed limited domestic flights on the 15th of July and then re-launched international flights on the 01st of August, but also to a limited number of destinations and with reduced frequencies.
Some 8 African destinations were struck off due to lack of demand and the lack of past profitability and the airline just announced that when flights to New York will resume, it will be with a single frequency per week.

Given that the Kenyan government seems to have made it their mission to re-nationalize the airline, do they now need even deeper pockets to step in, not just vis a vis compensation to the banking consortium holding a major share package as a result of a debt for equity swap more than 2 years ago, but also for the individual small scale shareholders whose values had been massively eroded as a result of that move.

In addition, funds will be needed to bring the airline back from the state of technical bankruptcy, injecting enough capital to meet that goal and leave them with enough cash to see themselves through the coming lean months when air traffic, as a result of the pandemic, will remain depressed and passenger numbers low.

This is all in stark contrast to neighbours Ethiopian Airlines, which, when closing their financial year on the 07th of July – Ethiopia runs on a different calendar – declared an albeit reduced profit. While ticket revenues declined by more than a billion US Dollars for Ethiopian, did the airline maintain scheduled operations while operating more than 40 repatriation flights a week across the world. Some of ET’s wide body fleet was swiftly converted to carry cargo in the passenger cabin, also bringing in revenues, which overall were boosted by the wide range of auxiliary ventures the airline has been setting up over the years, such as the aviation academy, aircraft maintenance and their logistics hub, to name but three.
That not enough did Ethiopia continue to advance the final elements of construction at Addis Ababa’s Bole International Airport and the new departure terminal was officially launched earlier this month – fully compliant with ICAO’s #COVID19 guidelines and recommendations made by the WHO, IATA and AFRAA. The airport was operational throughout the pandemic while again in stark contrast were Kenya’s international airports closed for scheduled passenger traffic.

The airline is also continuing construction for the second phase of the Ethiopian Skylight Hotel – located just minutes from the airport – which when completed will bring the overall room capacity from presently 373 to 1010 while also offering more than 10.000 square metres of conferencing spaces and all the elements visitors expect of a 5 star hotel.

Both airport expansion for Jomo Kenyatta International Airport as well as the construction of an own hotel near or at the airport were for some time on the agenda of the Kenyan government and of Kenya Airways but that vision was eventually ditched, relegating Kenya effectively into runner up positions as far as African aviation is concerned, while Addis Ababa’s airport got a second runway, a new mega terminal for arrivals and departures and a hotel just a stone throw from the airport.

ATCNews is following the nationalisation project very closely and as and when the Kenyan government makes their move and parliament sanctions the expenditure, will readers be the first to know which direction Kenya Airways will be heading.

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