Kenya Airways owns 41.23 percent shares in Precision Air, the only major airline in Tanzania. It has also been undergoing financial turbulence in the past three years that saw regional routes being suspended in 2013. The airline is cross-listed on the Dar es Salaam Stock Exchange.

Kenya’s premier newspaper, the Daily Nation, reported yesterday that the cash-strapped airline has turned to debt to pay its workforce “as the airline flies under the weight of liquidity flow problems that have seen its debt burden hit $800 million (Sh1.47 trillion)”.

Quoting the airline’s chief executive officer, Mr Mbuvi Ngunze, the Daily Nation reported that KQ was experiencing tough financial times that had left it with no option but to take on debt to sustain its nearly 4,000 workforce. Mr Ngunze took over from Mr Titus Naikuni, who retired voluntarily last year after 11 years at the helm.

Deep financial turbulence

Last year, KQ posted after-tax losses amounting to $112 million (Sh200 billion). The airline, which markets itself as The Pride of Africa, has since been in a financial crisis that threatens its ambitious fleet expansion.

According to reports from Nairobi, KQ blamed the performance on dampened passenger numbers due to the suspension of flights to Ebola-hit Sierra Leone and Liberia and insecurity at the Kenyan coast.

The Citizen could not independently verify whether the airline’s profits are hinged largely on one key West African route. It also flies to various regional and international routes including Europe, Asia and Middle East.

According to the Daily Nation, KQ’s total current liabilities stood at $800 million as at September 2014. Short term loans account for $456 million and outstanding debts to suppliers work out to $178 million. The airline also has pre-payments or cash due in advance of carriage standing at $122 million.

 “So how am I paying my staff? I am paying them through debt,” chief executive officer Naikuni said in Nairobi mid-this week when he appeared on Citizen Television’s Business Centre show.

According to reports from Nairobi, KQ blames its situation on dampened passenger numbers due to the suspension of flights to ebola-hit Sierra Leone and Liberia and insecurity at the Kenyan coast.  Kenya Airways also has long-term loans, currently standing at Sh1.05 billion. In a region where nearly all other national airlines collapsed or are on their deathbed but for Ethiopian Airlines, KQ has been seen as a prime example of how a national carrier can be led through a successful path.

SOURCE: THECITIZEN