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Kenya Airways halves losses, receives approval for KSh20 billion bailout

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Kenya Airways (KQ) claimed that its net losses in 2021 were cut in half to KSh15.87 billion, and the Kenyan government is scheduled to provide a KSh20 billion bailout.

In 2021, the Nairobi-based airline recorded net losses of KSh15.87 billion ($138 million), down 56.58 percent from a net loss of KSh36.2 billion ($314 million) in 2020.

According to Business Daily, the national carrier is likely to receive a KSh20 billion ($173 million) bailout after receiving permission from Kenyan Members of Parliament.

The airline credited its lower annual net loss in 2021 to a 3.6 percent reduction in operating expenses, as well as cost-cutting measures and income diversification through cargo operations.

Kenya Airways’ Board Chairman, Michael Joseph, acknowledged that limits deriving from the Omicron variation impeded the airline’s growth in a group audit released on March 29, 2022.

“During 2021, KQ still felt the impact of the Covid-19 pandemic due to some restrictions and limitations due to the advent of the Omicron variant, particularly affecting our Dubai and Guangzhou routes but little impact in the European, US and regional routes,” commented Joseph.

KQ had 2.2 million passengers in 2021, which was a 25% increase over 2020 and a 57% decrease over 2019. In 2021, the airline had revenues of KSh70.2 billion ($610 million), up 33% from KSh52.8 billion ($459 million) in 2020.

Joseph added: “Even with all these challenges, Kenya Airways has weathered the storm to post significantly improved results. An incredible amount of work by the Board and management has gone into these results. Management sought alternative revenue streams to replace lost revenue because of various travel restrictions. These revenue sources included air charter services, which increased by 300% and ancillary revenues which increased by 65%. In addition, management have reduced costs by 3.5% and reducing lease rentals for the aircraft by KSh10 billion ($86.9 million).”

“As we close out another year of operation through the global pandemic, we reflect on the journey that the airline has had this year,” said Allan Kilavuka, Group Managing Director & CEO, in a statement from the airline.

Kilavuka added: “The leadership is committed to strengthening our business and achieving profitability by embracing the ideals of sustainable business operations anchored around resilience, innovation, and diversification. We are making investments in innovation, technology and other efficiencies that will give our employees the support they need to take care of our customers. I remain grateful to Kenya Airways’ employees for their continued commitment to our customers as it has been crucial to our ability to weather the effects of COVID-19, and it will fuel our success as we move forward.”

In addition to the airline’s restructuring and bailout approval, Joseph stated in an article published by Business Daily on March 31, 2022 that Kenya Airways would resume paying full salaries.

Following the commencement of the coronavirus pandemic in March 2020, the first pay cuts were implemented. In January 2021, more salary cuts were enacted, which were projected to last six to twelve months.

The Kenyan government promised to give financial help to KQ throughout FY2022 and FY2023 to aid with the carrier’s restructuring in December 2021. The $1 billion package was expected to settle outstanding debt, payment obligations, and restructuring expenditures.

Following agreements with the Kenyan Airlines Pilots Association, Kenya Airways resumed paying full salaries to its personnel in December 2021.

Following a delay in collecting its bailout money, Kenya Airways CEO Allan Kilavuka indicated in a note to employees that the company would revert to lower compensation in February 2022. He said that this move was taken to save money and keep the airline solvent, guaranteeing that overdue workers’ wages would be paid after KQ got its rescue monies.

Kenya Airways last made a profit in 2012, and it went on to lose money for the next ten years.

A new agreement with South African Airways to become a pan-African airline, on the other hand, could help the Kenyan carrier turn the curve.

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