Kenya Airways looking to sell stake to raise cash to stem losses

Kenya Airways is talking to “about 3 or 4” institutional investors and airlines about buying a stake to raise cash for the loss making carrier, its CEO said earlier this week.

The carrier, has been reducing the size of and modernizing its fleet, selling land and cutting jobs to recover from losses caused by a slump in tourism.
“We are talking to about 3 or 4 parties,” Mbuvi Ngunze, the CEO of Kenya Airways, told reporters.

The search for a strategic investor is part of a plan to raise new debt and equity funds. Ngunze did not say how much they planned to raise but the company previously said it would need about Ksh70 billion US$692 million.

Kenya Airways is also talking to its creditors, including banks, to amend terms of its debt and provide it with sufficient funds for operation in the short term, he said. The Kenyan government, which has a 29.8 percent stake, said it was still examining the proposals for recapitalization.

“There is ongoing work to determine the nature of the restructuring that is going to take place,” said Esther Koimmett, the public investment secretary without offering more details. Ngunze said they were encouraged by the interest the business has received from potential suitors, attributing it to Nairobi’s status as a major African hub airport.

Kenya Airways has an extensive route network on the continent, operating numerous flights a week to cities like Lusaka, Zambia in the south and Accra, Ghana in the west.
“We have a fantastic business across Africa – Africa is where things will grow and it shows you that people have an interest in the business of Kenya Airways in spite of the fact that we have had these hurdles,” he said.

Forward Keys, a firm that predicts future travel patterns by studying bookings, said last week air travel to Kenya was up 14.9 percent in the first 8 months of this year, outpacing a 5.6 percent growth rate for the entire continent.

Ngunze attributed the higher demand to some recovery in tourism in Kenya after a spate of Islamist attacks since 2012 had deterred holidaymakers, and more international meetings being hosted by the country. Kenya’s attractive business climate has also been highlighted by several famous visitors this year, including Facebook founder Mark Zuckerberg.

Ngunze cautioned, however, that there was a lot that still needed to be done before the sector can fully recover. “We are still significantly behind where we wanted to be,” he said. “We have to be patient.”

Source: Reuters