The government has snubbed a plea for Ksh7 billion bailout money for national carrier Kenya Airways (KQ).
The government says that the troubles bedeviling the carrier are beyond Covid-19 pandemic, which was cited as one of the reasons for its financial woes.
KQ was seeking for the funds to help pay workers, service the grounded planes and pay utility bills such as water, electricity, parking fees among others.
KQ has grounded its fleet of planes since the country suspended international flights,adding to its financial troubles which existed even before Covid-19.
Treasury Cabinet secretary Ukur Yatani now says that the government is focused on nationalising the carrier as a long term solution for KQ.
“We are not making any commitments at this stage. Kenya Airways need to remain afloat but it is also important to look at structural challenges because what is happening now is more than the business environment,” said Yatani.
Under the nationalisation plan, KQ will be a subsidiary of an aviation company alongside Jomo Kenyatta International Airport, an aviation college and Kenya Airports Authority, which will operate all other airports.
The carrier has been relying on cargo flights to generate revenue, which is not enough to sustain the company at a time when internal passenger flights to the most vibrant destinations like Nairobi, Mombasa and Kilifi are suspended.
Recently, the Kenyan government inked a deal with Ethiopian Airlines to operate passenger planes grounded due to Covid-19 for shipment of cargo between the Jomo Kenyatta International Airport ( JKIA) to Europe and Asia.
The deal was signed on April 3, allowing Ethiopian Airlines to fly cargo using six of its passenger planes from Mombasa to Nairobi and Asia and Europe, posing a threat to KQ’s cargo business.
Kenya is KQ’s main market for both passenger and cargo business, and according to the CEO Allan Kivaluka the airliner was not consulted before the deal was signed.
“Anytime you have a carrier wanting to come to your domain, you need to be consulted so that you are not disadvantaged at your main market,” Kivaluka told Business Daily.
The deal was signed at a time when the cargo business in the world is fetching highly due to the Covid-19 pandemic.
KQ has been making losses since 2014 after a failed expansion drive, among other factors. Its earnings for the year ending 2019 are expected to go down by 25 per cent or more compared to earnings reported in 2018.
Fuel, personnel and cost of aircraft contribute to about two-thirds of the airline’s operating costs.