Kenya Airways to restructure its financing: New Chairman

Kenya Airways needs to extend debt repayments and make other changes to restructure its balance sheet, which would take priority over finding a strategic partner, the new chairman of the loss-making airline told Reuters. Shares in the carrier, 27 percent-owned by Air France KLM , have surged 68 percent this month on hopes of a turnaround after four straight years of losses.

The appointment of veteran telecoms executive Michael Joseph as chairman has also lifted sentiment. Pilots had threatened to strike from last week to demand management changes, but called off the action when Joseph’s appointment was announced. “Our first priority is to restructure the financing and once we have done that we can start thinking about a strategic investor but it is too early to talk about that at the moment,” Joseph said.

Restructuring would aim to secure “longer (credit) terms, changes in interest rates”, Joseph said yesterday, his official first day in the role after replacing Dennis Awori. Asked about the fate of Chief Executive Mbuvi Ngunze who pilots also demanded should go, Joseph said: “The priority is stability in the airline. When you are restructuring your financing, you need continuation of leadership.”

He did not elaborate. Kenya Airways, also partly state owned and which carries 12,000 passengers a day in its fleet of Boeing and Embraer planes, has been hit in recent years by falling earnings due to a decline in the number of visitors to Kenya. Tourism has been hurt by security worries stoked by Somali Islamist group al Shabaab’s attacks in the country, in apparent retaliation for Kenya’s military deployment in Somalia. The airline has been reducing the size of its fleet, selling noncore assets like land and cutting jobs to recover from the losses it incurred after tourism slumped. It has also said previously that it requires fresh capital of 70 billion shillings ($691 million). — Reuters