Kenya Airways planes at Jomo Kenyatta Airport(JKIA), Nairobi. Kenya Airways is in talks with its lenders to extend moratoriums on repayment of loans, with demand in the aviation industry still heavily affected by the pandemic.
The airline expects its revenues to remain subdued this year.
KQ said it was able to conserve more than Sh6.5 billion last year following moratoriums it got from banks as it sought mechanisms to enable it to cope with the adverse effects of Covid-19.
The airline got an initial six-month moratorium to October 2020 that was extended by another nine months to June 2021. Most of its leaders only agreed to a moratorium on the principal loan amount. The carrier had to continue paying interest.
KQ Head of Treasury and Corporate Finance Geoffrey Langat said the company is negotiating to extend the moratoriums, considering that the aviation sector is still experiencing the disruptions caused by the pandemic. KEEP READING
“From March 2020, Kenya Airways Plc revenues declined drastically following the onset of Covid-19. This meant that the airline could not generate enough cash to cover its fixed costs (such as finance fleet costs and overheads) putting pressure on the company’s cash position. This situation called for urgent intervention to ease pressure on the cash position,” said Langat.
“Finance costs constitutes one the largest fixed costs for KQ.”
The carrier has a mix of loans from various lenders including local and international banks. It has also been receiving shareholder loans from the government, which was the only one that advanced the carrier new loans last year, totalling Sh11 billion.
Servicing debts
While the Sh6 billion conserved over the year will be paid over time, once the carrier resumes servicing its debts, it offered KQ money to use during the year when its income substantially dropped due to Covid-19. KQ has recently said it needed Sh55 billion to be able to survive over the next coming year.
For four months, the carrier’s passenger operations were grounded.While it continued offering cargo services, it has not been strong in that area. Even after the resumption of passenger flights in August last year, demand is yet to pick up.The carrier’s technical department also said it saved Sh1.4 billion ($13.2 million) following the review of some of its contracts with suppliers as well as insourcing some of the functions such as servicing aircraft that had been outsourced.KQ Technical Director Evans Kihara said the carrier had reviewed all […]
