KQ seeks fresh bailout funds from shareholders

October 27, 2016
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KQ Managing Director Mbuvi Ngunze says the move is also intended to reduce the overall debt structure to a sustainable level/FILE
KQ Managing Director Mbuvi Ngunze says the move is also intended to reduce the overall debt structure to a sustainable level/FILE

, NAIROBI, Kenya, Oct 27 – Kenya Airways (KQ) is seeking to renegotiate for new funds from its shareholders in a bid to sustain its business.

KQ Managing Director Mbuvi Ngunze says the move is also intended to reduce the overall debt structure to a sustainable level.

Though he did not disclose how much the airline needs to run comfortably.

“This is what is occupying my team, our advisors and business partners that we work with we will give an update when we are ready,” he stated.

The firm has been going through financial turbulence and has since sold a five acre piece of land and some aircrafts.

In the half year ended September 30, 2016 the airline received one off cash injection of Sh1.7 billion from sale of assets and a bridge loan of Sh9.8 billion from Government of Kenya.

In the period under review, the airline’s cost of borrowing went up to Sh3.8 billion.
The African Export – Import (Afrexim) Bank last year agreed to lend the airline Sh20 billion as a bridging loan to ease its cash – flow constrains and has already received about Sh10 billion.

The government also bailed out the airline with Sh20 billion in March 2016 to help the firm through its financial crisis.

The airline on Thursday posted Sh4.7 billion loss in half year ended September 30, 2016, a 60 percent loss reduction from the Sh11.9billion posted in the same period last year.

The improvement was attributed to growth in cabin factor by 3.3 per cent during the period, with an increase of passenger numbers by 89,000 to 2.2 million and lower operating costs made possible by fleet rationalization.

However, the reduction in capacity saw revenues drop marginally by 3.5 per cent to Sh54.7 billion as decrease in wide body capacity led to revenue from cargo decreasing by 20.9 per cent.

The airline also suffered a foreign exchange loss of Sh1.6 billion while the cost of borrowing went up to Sh3.8 billion.

Former Safaricom Chief Executive Officer Michael Joseph has already taken over as Chairman after the resignation of Ambassador Dennis Awori following demands by the pilots association which had threatened to mobilize a major strike.

The exit came at a time when the airline under pressure both from the shareholders to assure the effectiveness of its turnaround plan after loses of close to Sh50 billion within two financial years.

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