• Saturday, 22 June 2024
The IMF has tied additional Kenya Airways loans to the airline's recovery progress.

The IMF has tied additional Kenya Airways loans to the airline's recovery progress.

The International Monetary Fund (IMF) has imposed stringent conditions on Kenya Airways (KQ) bailouts, tying additional cash to turnaround results in order to avoid wasting taxpayers' money.

In recent years, the airline, which is slated to undergo a restructuring costing more than Sh118 billion ($1 billion), had struggled with serious cash flow issues, rendering it unable to pay lessors and creditors' past-due debts. As a result, there are huge outstanding liabilities.

"Steady implementation of Kenya Airways restructuring plan—with clear communication linking exchequer support to progress on key performance indicators remains essential to achieving a least-cost strategy, even as KQ's debt servicing needs for both guaranteed and unguaranteed amounts are addressed and options for cost savings in debt service are sought," the IMF said.

Financial reorganization
Earlier this year, the airline hired Seabury Consulting, a US-based consultancy firm, to help it with a financial restructuring and revitalization strategy.

The Treasury said in a budget document published in Parliament in April that it will provide KQ another Sh36.6 billion bailout in the fiscal year 2022/2023 to help the national carrier recover from the Covid-19 collapse.

The allocation comes just weeks after MPs authorized the airline's Sh20 billion bailout.

The Sh36.6 billion commitment, dubbed a strategic government investment, is set to bring the airline's state backing to Sh56.6 billion in less than a year.

The State, which owns 48.9% of KQ, abandoned ambitions to nationalize it earlier this year as a long-term solution to its financial troubles.

Shares have been halted.
The measure, which MPs adopted in July 2019, would have delisted the airline from the Nairobi Securities Exchange, where trading in its shares has been banned since July 2020.

The government sought to follow countries such as Ethiopia, which manages all aspects of air transportation, from airports to fueling operations, via a single company, with funds from the more profitable sectors used to boost others.

According to the plan, KQ would have been one of four subsidiaries in an aviation holding company that also included Jomo Kenyatta International Airport, an aviation college, and the Kenya Airports Authority.

KQ reduced its net loss by 56.58 percent for the fiscal year ended December 31st due to increased income as a result of the relaxation of Covid-19 limits.

In the review period, it reported a net loss of Sh15.8 billion, compared to a net loss of Sh36.2 billion the previous year.

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