Kenya Airways’ debt owed to various creditors including local and international banks as well as the government has increased to more than Sh188 billion.
The details were disclosed by the national carrier’s officers led by CEO Allan Kilavuka when they appeared before the Public Debt and Privatisation Committee of the National Assembly.
It emerged that two foreign banks – USA’s JP Morgan Chase Bank and Citibank, were owed more than Sh74.7 billion under the Tsavo and Samburu facility respectively as of May 31, 2023.
KQ owed local banks Sh31.4 billion, Sh58.6 billion for the case of the government, and Sh22.8 billion in respect of outstanding supplier payments.
The airline bosses said in the session chaired by the committee’s deputy chairman Kitui Central MP Makali Mulu that there were risks to the unpaid debts.
The Tsavo facility was a special purpose vehicle in the State of Delaware, USA where KQ borrowed 924 million US Dollars to procure six 787-8 aircraft and a 777-300 and an engine.
“Approximately 90 per cent of this facility was provided by Citibank and JP Morgan Chase Bank and was fully guaranteed by the US Exim Bank,” Kilavuka told MPs.
The remaining 10 per cent was funded by Africa Import Export (Afrexim) Bank.
For the Samburu facility, KQ reported that the special purpose vehicle was incorporated in the Cayman Islands to borrow 310 million US Dollars for acquiring 10 Embraer jets.
“This is a syndicated loan led by Standard Chartered Bank and includes China Development Bank, Nedbank, Afrexim Bank, Trade Development Bank.”
The facilities were acquired under the project ‘Mawingu’ which was initiated in 2009 to see KQ increase its hold as the leading airline in the region.
KQ managers pleaded with MPs to mitigate the debt saying with that removed, the airline would be profitable.
“Without the debt, KQ would be posting profits,” the KQ boss said.
Makali said the aim of the committee is to establish whether KQ has a clear turnaround strategy.
“We have concluded that the debt is the problem. KQ is profitable but the challenge is the debt is part of them,” the MP said.
He backed KQ bosses’ assertions that without the debt, they will be back to profitability.
“We agree with you that if the government can take the debt, you will survive,” the MP told the KQ managers.
Makali said, “The government has accepted to take over the debt and turn around the company.”
KQ was allocated Sh14 billion in the supplementary budget as bailout cash for buying off some of the debts.
Another Sh17 billion has been allocated in the next year’s budget, and another Sh18 billion in the subsequent year.
MPs have asked the KQ team to furnish parliament with reports on how the government loan is captured in its books.
They also demanded details of KQ shareholding and the beneficiaries of the special purpose vehicles the entity operates.
