KQ seeks to increase fleet, add 12 new destinations after profit jump

After posting a net profit of Ksh.513 million for the first time in over a decade, the national carrier Kenya Airways now says it will be looking to increase its fleet by an additional 30 to 40 per cent and grow its destinations from the current 48 to over 60 in the next five years.

According to CEO Allan Kilavuka, the airline is currently facing challenges with fleet acquisition owing to manufacturing delays due to backlog from both Airbus and Boeing.

The positive earning for the first half of 2024 seems to have reaffirmed Kenya Airways' strategy to move the airline back to profitability despite the debt that the airline currently carries.

Kilavuka stated that for the airline to remain profitable, it will require a capital injection that will enable it to repay the Ksh.120 billion it owes.

He disputed claims of government bail-out noting that the funds extended to Kenya Airways by the National Treasury are considered debt that the airline will repay.

“If we can bring in equity close to that number that is negative equity then we will rebalance the debt to equity close to one to one…a lot of the debt that we are talking about is debt to shareholder loan so these amounts that you keep hearing about that government has bailed out KQ is loans to Kenya Airways with the belief that Kenya Airways will pay it back,” he noted.

It is this capital that the airline hopes a strategic investor will inject in return for a 49 per cent stake after valuation which is set to commence in the coming days.

Kilavuka said the capping of equity at 49 per cent is to ensure the airline remains a Kenyan company. In the capital raising drive, the airline hopes it will be able to expand its fleet by up to 40 per cent and increase its destination to 60, from the current 48 in the next five years.

“We are looking for a starting investor who can inject capital, they should also be able to add value; if it’s an airline they can complement our network, if it’s a bank they can help us structure how our balance sheet looks…so we are looking for people who can add value,” added the CEO.

Although Kenya Airways agrees on the need to modernise the airport, Kilavuka has expressed reservations on the hiking of fees as proposed, saying broader engagement is needed before the deal is implemented.

While Kenya Airways is the biggest user of the airport, Kilavuka said they have not been roped in on the Adani deal.

“We control about 70 per cent of that airport, it is important that we have a discussion with the people who intend to take over. We do not want a situation where we have an exponential increase in fees…even the design of the airport should be suitable to us as the key players so that the flow of passengers make sense,” he said.

As the airline savours the profitability milestone, Kilavuka expressed concerns over the current macroeconomic environment in Kenya and globally, even as the Mpox scare continues across the world.

At the same time, taxes and cost across Africa continue to pose yet another set of headwinds for the airline.