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Government backs out of plan to own Kenya Airways

The Government still aims to provide financial support

Transport CS James Macharia flags off a Kenya Airways plane during the resumption of local flights in 2020

The Government appears to have moved away from plans to nationalise Kenya Airways but still intends to provide financial support for its restructuring.

The news comes only days after the International Monetary Fund approved a disbursement of Sh29billion for Kenya despite debt currently at Sh7.7 trillion.

Plans have long been in the works to nationalise the ailing carrier, but legislation supporting the move has struggled to make it through the National Assembly.

The IMF says the government, citing the economic benefits of having a national airline, is undertaking a multi-year restructuring of the airline.

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“The authorities are developing plans to restructure Kenya Airways and anticipate providing significant financial support over the medium term,” the IMF disclosed.

It says much of the restructuring cost for Kenya Airways is unavoidable because the state has previously guaranteed Sh75 billion in debt owed by the airline. The carrier, further hit by the pandemic, has since has run large arrears.

”The restructuring plan aims to enable Kenya Airways’ adaptation to the challenges facing the aviation industry in the post-Covid pandemic environment.

Kenya Airways will be required to trim down its network, rationalise frequencies of flights, operate a smaller fleet, and rationalise its staff complement,” the IMF said.

”It will be essential to ensure that all parties are aligned, committed, and motivated to deliver on this strategy,” it adds.

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The IMF further disclosed the government will be taking over Sh80 billion of the airline debt and will, over this and the carrier’s next financial year, provide Sh50 billion as direct budgetary support to help clear overdue payments and cover restructuring costs.

Kenya Airways posted a further Sh11.5 billion loss in the first half of 2021, as revenues and passenger numbers remained 53% and 63% down on pre-crisis levels respectively.

Last month the carrier signed a “strategic partnership framework” with South African Airways with view to creating a pan-African airline group.

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