The Cabinet has approved USD350 million (Sh45,398,500,000) in shareholder financing for Kenya Airways to help the national carrier meet urgent financial obligations, fund aircraft maintenance and return grounded planes to service as part of its long-term turnaround plan.
The financing is intended to support the airline’s operations and strengthen its financial position as the government seeks to safeguard a carrier that contributes more than USD1.3 billion annually to Kenya’s Gross Domestic Product (GDP).
According to the Cabinet announcement, the funds will be disbursed in tranches under the oversight of the National Treasury, with a repayment period of up to 10 years.
The financing could also be converted into equity, subject to the necessary approvals, providing an alternative arrangement for managing the government’s support to the airline.
The approval comes alongside another measure targeting Kenya Airways’ existing debt burden, with the Cabinet endorsing a proposal to restructure Sh122 billion in government loans, together with accrued interest.
Under the proposed arrangement, the loans and accumulated interest would be converted into an equity-qualifying tradable instrument intended to strengthen the airline’s balance sheet and support future capital raising.
The two measures form part of the government’s broader effort to support the airline’s financial recovery and improve its capacity to sustain operations.
The Cabinet said the shareholder financing would address immediate financial obligations, including aircraft maintenance and the return of grounded planes to service.
Returning grounded aircraft to operation is among the priorities outlined in the financing plan, although the announcement did not specify the number of planes affected or provide a timeline for their return to service.
The government also did not disclose the schedule for disbursing the USD350 million or identify the specific obligations that would be funded in each tranche.
The proposed restructuring of the KSh122 billion in existing government loans is intended to improve the airline’s financial position by changing the nature of the outstanding obligations into an instrument that qualifies for equity treatment.
The Cabinet announcement said the arrangement would “strengthen the airline’s balance sheet and support future capital raising.”
The conversion, however, remains subject to the necessary corporate, shareholder and regulatory approvals, meaning implementation will depend on the completion of the required processes.
The same approvals will apply to the broader turnaround measures, according to the announcement.
Kenya Airways plays a role in supporting tourism, trade and regional connectivity, sectors that contribute to economic activity and the movement of people and goods within Kenya and beyond.
The Cabinet cited the airline’s contribution of more than USD1.3 billion annually to the country’s GDP as a reason for safeguarding its operations.
The planned financing and debt restructuring are therefore intended not only to address the carrier’s immediate financial pressures but also to support its longer-term recovery and ability to raise capital.
However, the announcement did not provide details of the airline’s current total debt, its latest financial performance or the expected financial returns from the government’s proposed intervention.
It also did not outline specific performance targets or deadlines against which progress under the turnaround plan will be measured.
The next steps will involve disbursement of the approved financing under National Treasury oversight and securing the required approvals for the proposed debt conversion.
The government’s measures are intended to provide Kenya Airways with financial support for urgent operational needs while creating room for longer-term balance-sheet restructuring and future capital raising.