The Kenya National Treasury is planning to reduce state funding to Kenya Airways by $79.8 million. Until now the airline received funding of $239.5 million, but according to the supplementary budget for the financial year 2022-23, the funding will now be cut to $159 million.
This decision is taken in sync with the Kenya government’s strategy to lessen the airline's dependency on state funds by the end of 2023. Earlier this year, in its draft Budget Policy for 2023, the government said it would develop a turnaround strategy for Kenya Airways.
As a part of the strategy, the airline will receive $283 million in financial aid from the state to continue operations.
In spite of state help, the airline is operating with significant losses. In the first quarter of 2022, the government spent around $207 million to save the airline, which was used for maintenance, employee salaries, settling utility bills, and daily airline operations.
As of November 2022, Kenya Airways' debt totalled $835 million in loans, letters of credit facilities, and convertible equity amounts. Before the airline can operate independently of state funds, state loans will have to be settled while focusing on fleet and network simplification, staff rationalisation, and cost management. The $283 million from the government will prevent defaults for the settlement of lessors' arrears and working capital support.
The Export-Import Bank of the United States (Exim) issued Kenya a default notice for delayed payment of a $454 million loan that the government borrowed to fund Kenya Airways. The airline defaulted on part of its $525 million loan from Exim, which the Kenyan government guaranteed.
As the financial condition of the airline continues to worsen, Exim is reported to issue a notice and demand full repayment of the loan. The was initially a 12-year facility, but the airline stopped the payments after its financial problems worsened during the pandemic.