Kenya Airways (KQ, Nairobi Jomo Kenyatta) is considering debt-to-equity deals as one of the possible solutions to its ongoing financial woes. The revelation comes as the struggling carrier's financial standing worsened last week after it reported its fourth straight annual loss.
For the year ending March 31, 2016, Kenya Airways posted a net loss of USD262 million which it blamed on a strengthening US dollar, increased borrowing costs as well as fuel hedge losses. In all, its state of negative equity has now worsened to USD357 million.
Despite the negative news, The EastAfrican newspaper says Treasury Cabinet Secretary Henry Rotich revealed last week that private equity investors had shown an interest in investing in the airline. It is within this context that a debt-to-equity scheme would also be considered, the paper said referencing informed sources.
Currently, Kenya Airways' counts the Kenyan government and KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) as its largest shareholders with 30% and approximately 27% respectively. Government has already committed to a KES10 billion (USD98.8 million) bridging loan.
“The Government of Kenya and KLM, in their capacity as major investors in Kenya Airways, have indicated their continued strong support of the company’s operational turnaround and the capital structure optimization process,” airline CEO Mbuvi Ngunze said. "They have been closely involved throughout the process and intend to remain major stakeholders in the company over the long term."
As part of its Operation Pride turnaround plan launched following the previous year's net loss of KES25.7 billion (USD251 million), Kenya Airways has committed itself to downsizing both its staff and fleet compliments.
With 600 employees set to be laid off, the carrier has already disposed of its unwanted B777-200(ER) fleet (to Omni Air International (OY, Tulsa International)) while several of its B777-300(ER)s and B787-8s have been sub-leased to Turkish Airlines (TK, Istanbul Airport) and Oman Air (WY, Muscat) respectively.
