Cash-strapped Kenya Airways has initiated talks with an airline
from the Middle East in a bid to raise cash in exchange for equity.
Sources within the company also told Sunday Nation that the national carrier has abandoned midway its multi-billion project for the purchase of new Dreamliner jets.
This is said to be part of new measures the airline hopes will boost its struggle to get out of its current financial crisis.
Though
the KQ management would not confirm or deny the engagement with a
potential partner on Saturday, CEO Mbuvi Ngunze is on record saying that
the airline is looking for a partner with deep pockets.
Those in the know say Qatar Airways and Emirates are among those the national carrier is looking at for a potential partner.
“We cannot comment on this. It’s a shareholder issue,” the company said in an emailed response on Saturday.
The
airline, which is expected to release its full-year financial results
this month, has been in bad financial state and has in the past few
months relied on short-term loans to pay workers and run daily
operations.
LEASE AIRCRAFT
It is estimated that the company would require about Sh18 billion to get out of the red.
Mr
Ngunze said KQ would not purchase the remaining three of nine of
Dreamliner jets it had ordered from Boeing in 2006 but would instead
lease the aircraft from an Irish company.
The airline
has already entered a sale and lease agreement with AWAS Aviation
Trading Ltd, a company based in Ireland, meaning that the three planes
will not be financed on the balance sheet of Kenya Airways.
“Given
our current financing, we must be prudent in finding innovative
financing solutions while keeping with our growth ambition. The new
aircraft will be important additions to our fleet as we strive to give
our guests the best experience possible,” the CEO said.
He said the lease deal would be beneficial to the company’s balance sheet as it seeks to improve its liquidity.
Huge
debts have been a key player in the matrix that brought the national
carrier to its knees. Most of this debt was acquired to finance the
purchase of Dreamliner jets as part of a fleet modernisation project
launched by former CEO Titus Naikuni.
The decision to
rescind its intention to buy all the nine new Dreamliners midway and
instead run three of those on a lease agreement could significantly prop
the company’s financial standing.
After announcing a
Sh10 billion loss in the half year, the worst performance in the history
of Kenya’s corporate sector, the company said it would contract a
financial advisor to help restructure its debt.
But it is yet to contract one.
Analysts
predict that the airline could report a bigger loss in the full-year
results, given that most of the factors it blamed for the poor half-year
performance have not significantly changed.
The
airline had blamed its huge loss on cancellation of flights to West
Africa after the outbreak of Ebola and reduced passenger numbers due to
travel advisories issued against Kenya in the wake of high insecurity.
The airline has yet to resume its West African flights while the security situation in the country is still wanting.
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