Kenya Airways bail-out may dilute Air France-KLM stake

KENYA Airways’ proposed $600m bail-out may increase the country’s holding in the carrier while diluting the 27% stake held by Air France-KLM, according to a senior government official.

Kenya and the Paris-based airline are the two biggest shareholders in Kenya Airways, which posted a record full-year loss at the end of last month. The government is reviewing its partnership with Air France-KLM and may increase its 30% holding if a capital injection dilutes the other principal shareholder, Treasury Secretary Henry Rotich told Kenya’s Citizen TV.

The airline needs about $600m for the business to recover, he said.

Kenya Airways, the thirdlargest carrier in sub-Saharan Africa, said last month it would borrow $200m and sell assets, after posting a full-year loss of 25.7-billion shillings ($254m), the biggest in the nation’s corporate history.

Air France-KLM had no comment, said spokeswoman Ulli Gendrot.

A bail-out would include a mixture of debt and equity, and depend on a turnaround strategy expected to be presented by the airline’s management shortly, Mr Rotich said. The recent financial results would make it difficult for the carrier to access long-term debt.

Kenya’s Treasury agreed to a 4.2-billion shilling bail-out earlier this year, Kenya’s Business Daily reported on May 28.

The airline hired African Export-Import Bank to help raise long-term capital and refinance the business, CEO Mbuvi Ngunze said last month.

It expected to raise $100m from the sale of land in the city and seven of its 52 aircraft, chief financial officer Alex Mbugua said.