Treasury Slashes Sh10 Billion from KQ Bailout

The National Treasury has reduced its assistance for Kenya Airways (KQ) by Sh10 billion as the exchequer starts to wind down its bailouts of the business.

According to documents from the first 2022–23 Supplementary Budget, the government intends to reduce the capital injection into the national carrier from the intended Sh30 billion to Sh20 billion.

Prior to this, the National Treasury had already informed the International Monetary Fund in December that it would give Kenya Airways Sh34.95 billion, including assumed payments for debt servicing.

It stated that Sh10 billion was distributed in September 2022. With at least Sh35 billion invested between 2016 and 2020, the State, which owns the majority of the carrier at 48.9 percent, has consistently bailed out KQ in recent years.

The exchequer said earlier this year that it was cutting down support for the national airline and set a deadline of December this year for an end to ongoing bailouts to the carrier in its draft 2023 Budget Policy Statement.

“To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways. A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023,” said the Treasury.

Kenya Airways has remained a fiscal burden, with the government currently completing a novation/takeover process for the carrier’s guaranteed debt of Sh60.7 billion ($485 million).

“As part of the ongoing discussions, the government has settled outstanding debt service arrears on the guaranteed loan as of the end of September 2022 and additional amounts through end-June 2023 on debt service payments on the guaranteed amount have been included in the Supplementary Budget,” the National Treasury added.

“All payments paid on behalf of KQ are deemed shareholder loans and shareholder agreements with agreed term sheets that are being prepared.”

The overall value of KQ’s debt portfolio as of November 17, 2022, comprising all debts, loans, letters of credit facilities, and convertible equity amounts, was Sh104.4 billion ($835 million).