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Kenya Airways starts process of identifying strategic investors
Kenya Airways Plc has started the process of identifying suitable partners to support capitalisation of the company to boost its efforts to reduce debt and expand operations.
KQ, as the carrier is known, plans to announce a strategic investor by the end of this year, Chief Executive Officer Allan Kilavuka said on Tuesday in a virtual briefing. The carrier, which is 48.9% state-owned, didn’t receive a direct disbursement from the National Treasury last year and instead got support in restructuring some debts, he said.
“The one thing that we have not yet completed is really to rethink our balance sheet — that is completely essential and that’s what we are really focused on this year,” Kilavuka said. “We are still projecting to break even at the very least for 2024.” KQ said in June it owed creditors $1.35bn and was at risk of defaulting on a $420.5mn government loan. Other loans include $439.8mn owed to a special purpose vehicle domiciled in Delaware set up for the acquisition of seven aircraft and an engine, and $97.9mn from another one incorporated in the Cayman Islands to purchase 10 Embraer jets. Local lenders are owed more than $224.9mn, while liabilities to suppliers, who include fuel companies, total $164.2mn.
The airline swung to an operating profit of 10.5bn shillings ($79.6mn) last year, and the annual loss narrowed by 41%, Chief Financial Officer Hellen Mathuka said during the briefing.
KQ shares have been suspended from the Nairobi Securities Exchange since July 2020 as the company implements the operational and corporate restructuring.
Deutsche Lufthansa AG’s €325mn ($352mn) investment in Italian carrier ITA Airways faces a potential veto from European Union merger watchdogs unless it fixes a list of competition concerns handed down by regulators.
The European Commission said on Monday in a so-called statement of objections it has concerns the deal could hamper competition on routes connecting Italy with central European countries, as well as flights between Italy and the US, Canada and Japan. The Brussels-based watchdog said the combination could also strengthen ITA’s dominant position at the Milan-Linate airport.Lufthansa and ITA
Airways can now respond to the EU’s concerns with an offer to remedy the anticompetitive risks. The regulator has until June 6 to come to a final decision.
Aside from warning about possible reasons for a veto, EU statements of objections typically flag potential ways forward to avoid such a scenario. In airline deals, this can include a remedy to share or give up routes to rival airlines, as well as a potential divestment of assets.
“We will shortly submit a concept for remedies to the authority in order to address any remaining concerns,” Lufthansa said in an emailed statement. “We are ready to constructively find solutions that are compatible with the economic reality of a highly competitive Italian aviation market and remain confident that ITA will become part of the Lufthansa Group family before the end of this year.”
The EU has increasingly been on the lookout for more robust airline concessions. A recent EU approval of Korean Air Lines Co’s 1.8tn won bid for smaller rival Asiana Airlines Inc involved remedies that included the divestment of Asiana’s cargo business, as well as a commitment to allow rival airline T’Way to provide flights on routes between Seoul and Barcelona, Paris, Frankfurt, and Rome.
Under the terms of the Lufthansa deal with ITA Airways, Cologne-based airline would initially buy 41% of the successor to failed flagship Alitalia from the Italian state, with an option to acquire the rest later.*