Home » Africa: Kenya Airways Charts New Course: Pursues Strategic Investor Amidst Forex Challenges

Africa: Kenya Airways Charts New Course: Pursues Strategic Investor Amidst Forex Challenges

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In a bold move to navigate the challenges posed by foreign exchange volatility, Kenya Airways sets its sights on securing a strategic investor.

Despite a recent operating profit of KES 998 million (USD 6.6 million), the airline’s Chief Executive Officer, Allan Kilavuka, acknowledges the persistent impact of forex fluctuations on its turnaround strategy, prompting the quest for a partner to fortify its position in the aviation landscape.

According to ch-aviation.com, briefing the Parliamentary Transport and Infrastructure Committee on October 24, he said with limited support from the government and growing foreign currency-denominated debts, the majority-state-owned carrier has no alternative but to seek a strategic investor, reported Business Daily Africa.

READ: Aviation: Kenya Airways and Uganda Airlines Plans For Interline Alliance and Re-Protection Agreement Towards a Seamless Travel in East Africa

Kenya Airways continues to struggle with debts of KES196.4 billion (USD1.3 billion) as of September 31, 2023, according to documents presented by Kilavuka to the committee. He explained that the depreciation of the Kenyan shilling against the US dollar has led to substantial forex losses, primarily due to the revaluation of US dollar-denominated loans and liabilities.

He said the airline aims to achieve a capacity growth of 23% in 2025 and 16% in 2026, while also stabilising the Kenyan shilling in the short to medium term. “We are hopeful of a turnaround.

Clarity sought on Kenya Airways’ fleet, SAA deal
A Kenyan senator wants clarity on the government’s measures to address an aircraft shortage at Kenya Airways (KQ, Nairobi Jomo Kenyatta), reports The Star newspaper.
Senate Committee on Roads, Transportation & Housing member and Nandi Senator Samson Cherargei wants the government to disclose the details and terms of current and planned aircraft leases and their commercial viability.

READ: Aviation: Kenya Airways Implements Mono-Fleeting Strategy as it Retires the Embraer and Bombardier to Boeing

Speaking in Parliament on September 25, he has also called for transparency on the strategic partnership framework between Kenya Airways and South African Airways (SA, Johannesburg O.R. Tambo) for a pan-African airline group and whether it will result in a merger of the two airlines.

Mombasa Senator Mombasa Faki lamented that Kenya Airways has been making losses for years and become a burden to taxpayers. “If you look at the ticket from Nairobi Jomo Kenyatta to Mombasa, it is not less than KES15,000 shillings (USD101). We are left to wonder whether the high cost is because of fuel, cost of running the company, or the debts the airline is supposed to repay,” he said.

Plummeting shilling pummels Kenya Airways’ bottom line

Kenya Airways’ 120% enhanced operational performance in the first half of 2023 has been nullified by a KES17 billion shilling (about USD117 million) loss due to foreign exchange fluctuations affecting monetary items, loans, and leases, resulting in a pre-tax loss of KES22 billion (USD151.3 million), the airline announced.

Speaking at an investor briefing, Group Managing Director and Chief Executive Officer Allan Kilavuka said a 14% devaluation of the Kenya shilling against major currencies has resulted in overheads rocketing by 22%, and, together with legacy debt, continued to hold back the airline.

“We are working to resolve the issue of the legacy debt in collaboration with our stakeholders and the Kenyan government. The debt is worsened by the 14% devaluation of the Kenyan shilling against the [US] dollar since January, which we have had to book as foreign exchange losses. The devaluation of the Kenya shilling has a significant negative impact on our financials as a majority of our transactions are carried out in the major foreign currencies. This has, in turn, an impact on our overhead costs.

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