Kenya Airways Seeks Debt Restructuring to Help Reverse Lossesby
First-half loss widens as as passenger revenue stays flat
Airline to focus on raising funds for business turnaround
Kenya Airways Ltd., the sub-Saharan Africa carrier part-owned by Air France-KLM, said it’s negotiating with local banks to convert 25 billion shillings ($244.4 million) of domestic borrowings to longer term debt as it strives for financial stability.
The airline, which is also 30 percent owned by the Kenyan government, owes local banks as much as 52 billion shillings, half of which it plans to convert into seven-year debt by next year, Finance Director Alex Mbugua told reporters on Thursday in the capital, Nairobi. The airline also plans to raise $146 million from asset sales as part of the turnaround plan, he said.
“We are negotiating to take it from one year to seven years and there is positive movement on this,” Mbugua said. “We are going to focus on securing longer term financing in future.”
Kenya Airways has been unprofitable since 2012 as the carrier struggles with a decline in tourism traffic following a number of attacks by Islamist militants. The airline posted a 12 billion-shilling loss for the six months through September, compared with 10.5 billion shillings a year earlier, after passenger revenue stayed flat, the company said in a statement on Thursday. Sales were little changed at 56.7 billion shillings.
“The main focus of the company will be on the business turnaround and the long-term capital-raising plan,” Kenya Airways said in the statement. “The above measures will safeguard and turnaround the prospects of the airline.”
In 2012, the company’s officials announced plans to raise a total of $3.6 billion over the next 10 years to fund an expansion plan that includes increasing its fleet to 107 aircraft from 34 and more than doubling its routes to 115 from 55.
KQ, as the airline is known, named Dennis Awori as chairman Wednesday, replacing Evanson Mwaniki, who retired on Oct. 9 after being a director at the company for 15 years. The replacement comes 11 months after Mbuvi Ngunze took over as chief executive officer, succeeding Titus Naikuni, who led the company for more than a decade.
KQ shares fell 7.6 percent to 4.85 shillings by 12:51 p.m. in Nairobi, extending the 2015 decline to 44 percent.