The uncertainty of COVID-19 and a pancession (pandemic-induced recession) of unknown duration, has meant the short-term bankruptcy risk for many airlines is at an all-time high.
It is becoming increasingly difficult for airlines to source finance through traditional private debt and equity pathways. But underlying this are some salient truths.
Many countries see mobility, airline jobs and a competitive aerospace sector as non-negotiables – and will do all they can to prevent the loss of a major airline.
Kenya’s Treasury has again agreed to inject cash into debt laden national carrier, Kenya Airways in the financial year starting July 2022, citing its role in supporting economic recovery, according to business daily.
This is after Stakeholders, in recommendations of the Budget Review and Outlook Paper (BROP), last month faulted the Treasury for not outlining a recovery plan for two troubled firms Kenya Airways (KQ) and Kenya Power and Lighting Company (KPLC) arguing that KQ and equally debt-laden KPLC were key in “fuelling economic growth and the creation of employment” and should be supported through cash injection in the budget.
“This is duly noted and will be done during sector allocations,” the Treasury wrote in the final BROP report which factored public input.”
The Treasury last Wednesday also opened a three-day public hearing forum which will inform sectoral budget proposals to be considered in the appropriation of the Budget Bill for the next financial year.
The bill should be ready for parliamentary approval by March 31—a month earlier than legal timeline— because of elections slated for August next year.
The Kenyan treasury, in last financial year ended June 2021, departed from its earlier International Monetary Fund (IMF)-backed stance which favoured long-term reforms to solve cash flow challenges facing state-controlled firms and parastatals instead of bailouts. This is after it pumped additional USD 90 million into Kenya Airways.
The national carrier has continued to make its plea clear for additional cash from anchor shareholder, the government, to help it out of its precarious financial position with operating costs rising faster than revenue.
KQ’s total revenue during the period reduced by 9% to USD 245 Million, however the airline recorded an improved performance compared to a similar period in the previous year
“We are in a negative equity position, which means we are insolvent as an organisation, obviously made worse by the pandemic,” KQ chief executive Allan Kilavuka said on August 26.
By Victor Shalton Odhiambo