Under the eye of its new CEO, Sebastian Mikosz, Kenya Airways (KQ, Nairobi Jomo Kenyatta) has made a number of changes as it works to turnaround after a disastrous few years. The Ex-LOT Polish Airlines chief executive has retrenched some senior staff, brought on his own people, cut routes and overseen the sale of two aircraft. However, Standard Media reports that foreign banks have begun to inspect some of Kenya's aircraft, which may be repossessed if a deal with local banks can't be met.
Kenya Airways is currently undergoing a USD2.2 billion debt restructuring exercise, in order to convert debt to equity and secure new funding sources. The deal was approved by parliament in June this year.
"The transaction is critical to ensure the viability of KQ as a business," says Richard Harney, from legal firm Bowmans which is managing the transaction. "Excess fleet capacity, structuring changes in the market and factors such as Ebola and international terrorism meant that the company's fleet modernisation programme launched in 2012 had left it with too much debt, leading to several years of record losses."
Under the plan, USD500 million of unsecured debt will be converted into equity, and new money facilities will be negotiated for post-restructuring operations. However, according to Standard Media, three local banks are holding up proceedings. If Equity Bank of Kenya, Ecobank and Jamii Bora Bank continue in their opposition to the restructuring plan, it could lead to the collapse of the whole deal. Kenya Airways has filed a petition with the Supreme Court of Kenya to force the banks to support the restructure, which it says is "just and necessary to safeguard the rights and existence" of the airline.
"I confirm that the failure to determine this application and to set aside the orders granted to the first applicant (Equity Bank) will mean that the airline will in all likelihood imminently cease to operate as the financial accommodation it has been receiving from its creditors was on the basis of the restructuring being completed by end of August 2017," said Kenya's Finance Director, Dick Murianki.
In the meantime, Kenya Airways is also working to rationalise its routes and fleet capacity. From October 29, flights to Hong Kong International and Hanoi Noi Bai International will be discontinued, with customers served via daily flights to Bangkok Suvarnabhumi and Guangzhou. Onward connections will be provided through partnerships.
"This network decision will help Kenya Airways to strengthen its focus on Africa. We will continue to serve our customers to Asia through our direct flights to China and Thailand and work closely with our partners to cover the Asian continent," said Kenya Airways Commercial Director, Vincent Coste.
Additionally, the carrier has sold two B737-700 aircraft and a GE engine, according to a filing by Air Partner Remarketing, which secured the deal on its behalf. Kenya Airways has leased back the aircraft.
