The repayments include Ksh2.37 billion (USD 15.5 million) for principal repayments and Ksh351.29 million (USD 2.3 million) for interest payments.

“The fresh instalment brings cumulative exchequer payments on the KQ guaranteed debt to Ksh13.35 billion (USD 87.1 million) with the first payment having been done in the quarter ending in December 2022,” Zawya reported.

“The total amount paid on guaranteed loans during the first three months of FY 2023/24 amounted to Ksh2.72 billion, which was payment for Kenya Airways loan comprising of Ksh2.37 billion for principal repayment and Ksh351.29 million for interest payments,” the Kenya Controller of Budget (COB) noted.

In 2022, the Kenya Treasury informed the IMF (International Monetary Fund) about taking over the debt contracted by Kenya Airways in 2017 from the USA Export-Import Bank (Exim). The African country took the step to facilitate the better management of risk for its national carrier including the potential call-up of the guarantee.

In February 2023, Treasury Principal Secretary Chris Kiptoo told MPs that Exim Bank USA had handed in a default notice after the KQ made a delayed payment of the guaranteed loan.

Despite paying down more than Ksh13 billion (USD 84.83 million), KQ’s guaranteed debt has soared by 13.4% since September 2022 to Ksh87.36 billion (USD 570 million) from Ksh76.97 billion (USD 502.3 million), due to the sharp depreciation of the Kenyan Shilling.

KQ’s debt takeover by the exchequer, known as debt novation, is dubbed as a part of the airlines’ wider restructuring, seeking to support the carrier cost-effectively.

The plan will incorporate additional capital injection by the state, along with cost cuts and network optimisation. Key Performance Indicators (KPIs) will also be set up for the KQ senior executives.

Meanwhile, the airline has warned of impending flight disruptions, due to the problems it is facing in the aircraft spare parts global supply chain. Kenya Airways Group Managing Director and CEO Allan Kilavuka said that the capacity shortage might persist for “approximately two weeks”.

Kenya Airways has now been hit with flight disruptions due to the crew shortage. The phenomenon, which started in December 2023, has now created a situation for the venture where it will have to forego any chances of making profits, as it faces the pressure of compensating the passengers being affected by the flight disruptions.

As per the media reports, on December 13 and 14, some 17 flights got delayed. For flight cancellations, especially on the European routes, KQ will have to refund per passenger some Sh92000.

Kenya Airways’ fleet has two B737-300s, eight B737-800s, nine B787-8 Dreamliners, and thirteen E190ARs. Of the overall lot, E190 5Y-KYS (msn 19000478) has been out of service in Nairobi since late October.

The venture has already taken the delivery of its first B737-800 freighter and plans to add a second unit of the type by February 2024.

Kenya Airways will utilise the aircraft on routes to destinations like Sharjah, Dubai World Central, Jeddah, Riyadh, Dakar Blaise Diagne International, Lagos, N’Djamena, Mogadishu, Mumbai International, Freetown, and Monrovia Roberts.

The airline is seeking a strategic investor as it battles foreign exchange volatility negatively impacting its turnaround strategy despite its recent KES998 million shilling (USD 6.6 million) operating profit.

Kilavuka, while briefing the Parliamentary Transport and Infrastructure Committee on October 24, said that with limited government support and growing foreign currency-denominated debts, the carrier had no alternative but to seek a strategic investor.

Kilavuka said that the venture was aiming to achieve a capacity growth of 23% in 2025 and 16% in 2026.

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The airline’s officials embarked on corporate missions to promote the company’s equity offer in the United States, China and the Middle East but the exercise seems to be a futile one as the venture has failed to receive investment commitments so far, as per a report from the Business Daily newspaper.

“All the potential investors agreed that the fundamentals of the company are very strong,” Kenya Airways CEO Allan Kilavuka said, adding the concern was on the debt level.

He also advised the need to lower the airline’s debt to get extra funding for the business.

In December 2022, Kenya’s President William Ruto led a delegation to Washington with a pitch to sell a controlling stake in the KQ.

The airline, as of May 31, 2023, owes up to USD 1.35 billion to creditors, including the 61.4 billion Shilling (USD 439.8 million) Tsavo facility related to the carrier’s acquisition of six Boeing 787-8 aircraft, one Boeing 777-300 ER aircraft and one Genx engine in 2012.

Kenya’s National Treasury has already indicated about not providing any capital injection for the troubled airline for the 2023/24 financial quarter.

Since 2020, KQ has been relying heavily on Kenyan taxpayers to sustain its operations amid its business downturn. The Kenyan Treasury provided Sh20 billion and Sh30 billion respectively for the 2021/22 and 2022/23 financial years, but it seems now the government is in no mood to keep its national carrier floating with the taxpayers’ money.

In March 2023, Kenya Airways reported a Sh38.3 billion loss for the full year period ending in December 2022. The figure doubled from the 2021 stats and marked the tenth consecutive financial year, where the company’s business health has remained in the red zone.

While Kenya Airways’ performance got reportedly impacted due to the Ukraine war and the resultant escalation of aviation fuel prices, the company recently reduced its losses by 17.6% to Sh5.6 billion, as per the reports.

In 2018, the crisis-ridden airlines even proposed to own aviation assets through a private investment proposal that would have seen the Jomo Kenyatta International Airport being operated and upgraded by a special purpose vehicle for the next 30 years.

However, the airline is now putting its stakes on its ‘Project Kifaru’ plan, which will ensure its fleet and network optimisation, along with collective bargaining, comprehensive capital restructuring, and last but not the least, partnership expansion across the continent of Africa, while terminating aircraft sub-leases.

Kenya Airways has even entered into an interline deal with Emirates Airlines, which will allow customers of both airlines access to new destinations on the two companies’ networks within a single itinerary.

The flyers will now have increased travel options and seamless baggage check-in to their final destination.

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Through this partnership, MailAmericas will contribute its market expertise and the knowledge it has gained in the regions of Latin America and Africa, where it has networks in over 40 countries. At the same time, Ethiopian Airlines will offer air transport service for carrying goods across its extensive network.

CEO of Ethiopian Group Mesfin Tasew stated, “We are pleased to collaborate with MailAmericas in the launch of eCommerce logistics services across Africa and Latin America as the premier air cargo service provider in Africa. Together, we have provided services to more than 20 nations in Africa and Latin America thus far, and we are eager to continue extending our reach. In addition, we can better serve our clients through cooperation by utilizing MailAmericas’ knowledge, bilateral agreements, and private networks.”

According to Tomas Miguens, President of MailAmericas, “We are happy to tie up with Ethiopian Airlines Group and expand our horizon into Africa’s area. As one of the major service providers of Cross Border E-Commerce in Latin America and has served the area for over 25 years, our subsidiary Mailafrica has given us substantial expertise. It gives us great pleasure to collaborate with the top airline in Africa. Every consumer will benefit from a better shopping experience thanks to faster delivery and better package tracking. To continue our profitable engagement with Ethiopian Airlines Group, we will constantly try to expand it and create new ventures.”

Ethiopian Airlines will be given access to all bilateral agreements and private networks of MailAmericas through the cooperation, allowing it to provide consumers in Africa, Latin America, Europe, the Middle East, and other parts of the world with competitive services.

Ethiopia is constructing a 150,000-ton-per-year e-commerce hub in Addis Ababa to expand its e-commerce logistics capabilities and service. To enable the efficient handling of goods ranging from small packages to boxes, skids, and built-up units, the e-commerce centre will also be furnished with an automatic sortation system and electronic transport vehicles (ETV) (BUPs).

The 2020–2021 fiscal year saw an annual freight uplift of around 770,000 tons for Ethiopian Cargo & Logistics Services, a significant global cargo network operator with a sophisticated warehouse able to accommodate one million tons annually.

With 66 specific cargo destinations in Africa, the Middle East, Asia, Europe, and the Americas, as well as 14 specialized freighters, it services more than 130 foreign locations. With 100% e-AWB from its primary hub in Addis Ababa, Ethiopian Cargo & Logistics Services also uses the most recent technology for data, information, and market intelligence.

The airline is also planning to become a Star Alliance member, in order to compete with Gulf rivals that are strong in connecting passengers between Asia, the Americas, and Europe.

As Africa’s largest airline, Ethiopian’s fleet size is expected to grow from its current count of 140 to more than 271 aircraft by 2035, operating in over 200 routes globally and carrying 65 million passengers annually.

Flights from Atlanta (ATL) to Bole International Airport in Addis Ababa (ADD) are slated to begin May 16, 2023. The rotation will run four times weekly, with a fueling stop in Dublin, Ireland, on the outbound journey and flying non-stop on the return to Atlanta.

Ethiopian Airlines also serves the North American cities of Chicago O’Hare (ORD), Toronto Pearson (YYZ), Washington Dulles (IAD), and New York (JFK).

Service to Denmark’s capital Copenhagen from Addis Ababa will also start in May this year after a 10-year hiatus. A non-stop from Addis Ababa to Singapore will be relaunched in March, 2023 after ceasing in 2017. The carrier will also resume its pre-pandemic services to China in March, one of the few international carriers to do so since China re-opened its borders in January 2023.

Ethiopian Airlines is also eyeing to compete with Emirates and Qatar Airways, thus setting courses for rapid expansion into Africa. Qatar Airways has already invested in the new airport in Rwanda’s capital Kigali and will be aiming to have tie-ups with RwandAir.

Kenya Airways and South African Airways are also making similar moves. The two carriers, which have code-sharing and shared lounge accesses, are working towards forming a new pan-African partnership.

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“We have agreed that that agreement should be progressed forward as it presents an opportunity for South Africa and Kenya to work together to build a pan-African airline,” said Kenya President William Ruto.

William Ruto’s South African counterpart Cyril Ramaphosa remarked, “We are committed to ensuring that the agreement that was signed between our two airlines goes forward.”

In November 2021, Kenya Airways and South African Airways signed a strategic partnership framework to discuss forming a pan-African airline by 2023. Both airlines have been going through financial headwinds due to the after-effects of travel restrictions and border closures during the COVID pandemic. However, experts are fearful about the whole plan.

As both airlines are now seeking exemptions from aviation watchdogs, analysts are fearing that such protectionist tendencies may further hamper the efforts to establish the Single African Air Transport Market (SAATM)

SAATM was launched in 2018 to implement the 1999 Yamoussoukro Declaration, under which African Union member states agreed to the principles of open skies. Despite the Declaration having two-thirds of the signatories, not a single flight has been taken up under the SAATM initiative in the last four years.

Nearly two-thirds of African Union member states have signed up to SAATM since it was launched in January 2018, but not a single flight has taken off under the initiative.

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President Cyril Ramaphosa told the media during a joint media briefing, “The decision of our respective national airlines to deepen their collaboration is further testament to the growing ties between our two countries.”

“President Kenyatta and I have reaffirmed the strategic importance of bilateral relations and reiterated our desire to elevate the nature of the relationship, which would include the conclusion of a strategic partnership agreement.”

Last week, Kenya Airways and Boeing entered into a partnership to develop the Fahari Innovation Hub, which was launched by the carrier in July. The Fahari Innovation Hub is a platform to unite innovators with entrepreneurs, to stimulate the development of the Kenyan aviation industry and address both current and future challenges.

Kenya Airways Group CEO and MD Allan Kilavuka told the media, “While the pandemic came with extreme challenges for the aviation industry, it also brought along opportunities for reflection initiatives, one of them being the Fahari Innovation Hub.”

“This not only enabled the presentation of new world-class ideas that became part of the solutions to the challenges we faced but also brought together partners with whom we have worked together across the value chain in a bid to revive operations.”

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In this regard, SAA’s interim chief executive, Thomas Kgokolo, said that their intention is to create the most formidable airline in Africa, benefiting from at least two attractive hubs in Johannesburg, Nairobi, and possibly Cape Town.

He further added that the next possible step is South African Airways and Kenya Airways is to set up a joint working group to further discuss the memorandum and put in place systems to achieve their jointly stated objectives.

In a statement, he said, “This joint memorandum with Kenya Airways, one of the continent’s strongest and most respected carriers, will do just that. […] Part of SAA’s core remit is to be a significant enabler of business and trade in Africa and it’s through a strategic understanding like this that real progress will be made in advancing South Africa and the continent’s growth.”

According to Kenya Airways chief executive officer Allan Kilavuka, the carrier would need to ask its lenders for more deferrals of capital repayments as it waits for parliament to approve its planned nationalisation.

Stating that lenders have been understanding so far, Kilavuka expects them to continue offering their support towards the carrier. Currently, the government of Kenya owns 48.9 percent of the carrier. While Air France-KLM owns 7.8 percent, the remaining 38 percent are owned by different lenders.

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Allan Kilavuka, Group Managing Director and CEO of Kenya Airways told the media, “Partnerships are vital in mapping out the future of our airline, something which the global crisis has reinforced. Innovation is a critical element of our long-term sustainability. Fahari Aviation is at the forefront of exploring advanced technologies, with a key focus in aviation, starting with drone technology. With this partnership, we look to develop innovative air mobility solutions for our clients in Kenya and throughout the region.”

The agreement will see Kenya Airways develop the scale electrical vertical take-off and landing (eVTOL) aircraft, also known as EVA (Electrical Vertical Aircraft).

Over the years, we have witnessed a growing emphasis with regard to climate change. The aviation industry has come under immense scrutiny for its contribution to climate change.

Earlier this year in May, Fahari Aviation also signed a memorandum of understanding (MoU) with UK-based logistics company Skyports to collaborate in launching drone services in the country.

In a statement, both parties said, “The partnership aims to explore the commercial viability and impact of various medical, logistical, and inspection use cases alongside Kenya’s leading public and private institutions with the launch of the first drone delivery flights slated for Q3-Q4 this year.”

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Kenya Airways’ Chairman, Michael Joseph told the media, “The Covid-19 global outbreak in 2020 was beyond anyone’s prediction, and its impact on the industry is expected to continue affecting air travel demand for the next two to three years.”

In January, Kenya Airways suspended flights to France and Netherland due to the rising number of cases of Covid-19. Kenya Airways suspended its flights from Nairobi to Charles de Gaulle Airport in France and the Schiphol Airport in the Netherlands. Kenya Airways said in a statement, “The temporary suspension is due to the new Covid-19 regulations in Europe that have resulted in depressed demand.”

In August last year, it was reported that Kenya Airways planned to slash 590 jobs in the second phase. The carrier eliminated 700 members of staff in the first phase. However, the entire process had targeted 1,500 employees including pilots, cabin crew, technical department among other divisions.

The Kenyan Aviation Works Unit was against the fresh round of pay cuts and non-payment of deferred salaries that was imposed by Kenya Airways. Kenya Airways workers faced pay cuts, however, the Kenyan Aviation Works Unit opposed the decision, terming it illegal, media reports said.

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Kenya Airways said in a statement, “The temporary suspension is due to the new Covid-19 regulations in Europe that have resulted in depressed demand.”

The carrier is expected to resume operations to France from March 3 and to the Netherlands from March 7th, according to media reports. An internal memo revealed that Kenya Airways is also planning further pay cuts of as much as 30 percent for employees due to the impact of the coronavirus pandemic.

In August last year, it was reported that Kenya Airways planned to slash 590 jobs in the second phase. The carrier eliminated 700 members of staff in the first phase. However, the entire process had targeted 1,500 employees including pilots, cabin crew, technical department among other divisions.

In this context, Group Managing Director CEO Allan Kilavuka, in a letter noted that, “Our situation continues to be extremely difficult. Last month we began the difficult but necessary process of rightsizing the organisation. The rightsizing process began with the relooking of our network. We have reduced the destinations and our frequencies to match anticipated demand. The next phase of the staff rationalisation actions will see some staff in the various departments across the organisation declared redundant. This phase is expected to impact about 590 members of staff.”

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Last week, Kenya Airways announced a fresh round of pay cuts of up to 30 percent. The pay cuts will be effective in January for a period between six to 12 months, media reports said. It is reported that Kenya Airways will not pay deferred salaries since last April because the carrier does not have the financial ability to clear the pays. 

Kawu secretary-general Moss Ndiema in the letter “We will never tire to remind you that you have no mandate or power under the law to purport to alter the terms and conditions of service of unionisable employees without any consultation, negotiation and agreement with the union. Therefore, any wish or desire by management to alter any of these terms unilaterally is illegal and ill-advised.”

More recently, Kenya Airways has suspended flights to France and the Netherlands due to the new regulations related to the pandemic. These regulations have been imposed in the European nations. 

However, the national carrier is planning to resume its flight operations to France on March 3 and to the Netherlands on March 7, media reports said. The carrier is a member of the Sky Team Alliance and currently flies 46 destinations globally.  Of these destinations, 33 are in Africa.

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