Kenya Airways Chief Executive Officer Allan Kilavuka said the company needs at least $500M to survive the effect of the coronavirus pandemic that has battered the travel business.
Kilavuka also called for the restructuring of the airline which is 49 percent state-owned.
“If we don’t restructure the airline, and take the airline as-is into this organization, then we are doing a disservice to the taxpayer,” Kilavuka stated. “Right now it is under-capitalized, given the effects of COVID.”
He also added that Kenya Airways will need only 24 aircraft over the next two or three years, out of its current fleet of 34 passenger planes and two freighters. Discussions are in progress with six leasing firms on swapping fixed rentals for utilization-based terms, while other proposals include converting unneeded airliners for short-term cargo purposes.
Discussions with unions were focused on removing costs without resorting to the 1,400 job cuts the company says may be needed. Measures will need to deliver 40 percent savings to match continuing revenue declines, the CEO said. In the interim, staff are drawing reduced pay and deferring the balance to a later date.
Recapitalization would pare debt after the company’s liabilities increased to 218.9 billion shillings at the end of June while providing capital for growth once markets begin to rebound, Kilavuka said.
The funds could be in the form of equity or a loan from the government, which is in talks to buy out minority investors including KQ Lenders Co. and Air France-KLM as lawmakers debate a nationalization bill.
According to Kilavuka, the legislation won’t merge Kenya Airways with the airport's authority but allow them to work together, especially since 60 percent of revenue at Nairobi’s Jomo Kenyatta International hub is generated by the carrier.
“We want Kenya to be the preferred hub for the region,” the CEO said. “For that to happen the airport needs to grow and modernize and the airline needs to be efficient and responsive to the needs of the market.”
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