Treasury loans Sh5 billion to Kenya Airways for engines repair

Treasury has injected Sh5 billion into Kenya Airways #ticker:KQ to fund the national carrier’s E190 Embraer fleet engines overhaul and maintenance.

The funding, a commercial loan that will also finance day-to-day operations for the loss-making airline, underlines its overreliance on Treasury-backed loans and financing.

The facility comes months after the Director of Criminal Investigations (DCI) opened a probe into the procurement of the service provider to maintain the engines of its aging fleet.

“The National Treasury made a loan on commercial terms to KQ of Sh5 billion for the purpose of enabling KQ to complete the scheduled engine overhaul programme on its E190 Embraer fleet and fund its general working capital requirements,” said Kenya Airways chairman Michael Joseph in a letter to the Nairobi Securities Exchange #ticker:NSE on Friday.

KQ, in plans announced last year, is also seeking to sell six Boeing 787-8 Dreamliner planes, a Boeing B777-300 and a spare GE engine in efforts to raise cash for its operations at the back of continued losses.

As at December 2018, the airline had a fleet of 41 airplanes comprising a mix of Boeing planes for long-haul and Bombardier and Embraers on its short and medium haul flights.

The shrinking fleet and shortfall in pilot numbers has in recent times forced the airline to cancel dozens of flights in what further dimmed its efforts to reduce its widening losses.

In January, KQ agreed to a deal with Kenya Airline Pilots Association (Kalpa) to hire 30 direct entry captains, both local and foreign to ease the acute shortage.

At the back of its struggles that have cut its fleet size from 52 in 2017, KQ will be re-nationalised before the end of the year after Members of Parliament voted last year in favour of the move that has been described as the most viable option to save it from mounting debts.

Treasury in November 2018 said it would buy out the stakes held by Air France-KLM, local banks and more than 80,000 individual shareholders and delist Kenya Airways from the NSE.