After what seemed like a rebound in 2024, Kenya Airways sank deeper into the red last year, and even deeper this year, after posting a 31.9 percent growth in its half-year loss to Sh16 billion.

While its operations have improved, bringing in more revenues, it is navigating elevated fuel prices and an industry-wide shortage of aircraft, engines and spare parts that has kept some of its planes on the ground and constrained its capacity.

The national flag carrier is also seeking an investor to support its growth plans, while working on its balance sheet and looking at leasing aircraft as a bridge to longer-term fleet expansion.

In this interview, KQ’s acting chief executive George Kamal discusses the carrier’s plan to return to profit, its plans to grow the fleet, the search for an investor and the restructuring of its debt.

KQ’s loss has continued to rise. What is the plan to turn it around?

This year, we have been significantly impacted by the Middle East crisis, which increased our fuel costs by up to 66 percent, year on year.

That’s average prices compared to average prices for the first half last year. But since the beginning of the war, our fuel costs have surged by 72 percent. That is the only reason we made a loss.

If fuel costs remained stable and we’re operating at full capacity, we would have reported a completely different number. Because we have seen a growth in demand. Our cabin factor increased by 9 percent, but our capacity was down.

And despite that, we recorded a growth in revenue. The second highest half-year revenue in the history of KQ. That tells you we have a viable business.

Without the rising fuel costs and the constrained capacity, would you have made a profit?

Absolutely. You know, our fuel costs rose by up to 72 percent, but we’re only allowed to put a fuel surcharge of up to 20 percent on fares.

The rest we have to absorb. I cannot pass it all to the customer. I cannot do that.

So this year we had multiple challenges. Rising fuel costs and the capacity constraints.

If you look at the impact they’ve had on us, yet we posted a growth in revenue, that tells you where we would have been if not for the challenges.

Is the capacity problem unique to KQ, and do you expect it to persist into next year?

It is not only a Kenya Airways’ issue. Globally, the leading original equipment manufacturers Boeing and Airbus have a huge backlog of over 16,000 planes. With this backlog, those OEMs pull out most of the spares to put in the new aircraft so they can deliver. So I can’t find any in the market, unless I look for them in the secondary market, which we don’t do.

At the same time, the same shops that work on their own engines to assemble them are the same shops I need to do my overhaul. That’s why the turnaround time went from 90 days to 120. Now it goes even beyond 120. But why does it appear more visible in KQ? Because the number of aircraft is very limited.

When do you expect the capacity constraints to ease?

We’re planning that by Q1, and that’s conservative, we should have our 787s up and flying. All of them. There’s no other discussion, except for the normal maintenance. Usually January is not a very high-season month, so you use it for maintenance. That’s normal maintenance, which takes 30 days up to three months. That’s it, and then it’s good.

Am I going to have the capacity I’m looking for? No. Because I’m looking for a bigger plan. Think big, you grow big. I’m looking to bring new aircraft and grow the capacity.

What are you doing to expand the fleet?

First of all, let me assume that I’m looking at buying. The earliest I can get the aircraft is 2032, 2033. That’s the minimum. This leaves me only with the option of leasing. Leasing a new aircraft is a bridge solution to the operating aircraft. We will use that bridge solution to get the capacity required to achieve 60 by 2030. Today we are 42.

But this 60 is not cast in stone. It is not a silver bullet. It might be a little bit higher, might be a little bit lower, depending on the availability of an investor and the investor appetite.

What kind of investor are you looking for?

All options are on the table. We have people approaching us from the beginning of the year. At first it was one, all of a sudden it became three and four.

Now we have to do the governance process. The governance process starts with an IM (Information Memorandum). You set it out in the market, you say this is what we are open to, then you go to the IM, you show the interest, then all of them come in.

Everybody can come with his own ability. You cannot dictate. I cannot say it’s equity or not. One can say, “I can give a loan.” Another says, “I need equity.” Another says, “I have aircraft and I can take equity by putting my aircraft in.” And so on and so forth.

We are open to everything and everybody. Very transparent process because we are publicly listed. No hidden agendas. Everything is on the table.

How can an investor invest in a debt-ridden company?

An investor will not invest in debt. The investor is coming to invest in growth. We are in the process of discussing with all the shareholders. You saw that the support from the government is very strong. We are having discussions. What we’re looking at today is restructuring the balance sheet at some stage when there is an investor coming in, and we’re looking at different options.

Will the government take up all the debt?

No, I don't think the government will take on any debt. As I understand it, restructuring will only happen if there is an investor. Why? Because the investor will come and take part of it, converting it into equity in the company. But the government will not be able to take on that debt.

Where would they get the money from? Who will pay for it? Yes, there will be restructuring and so on. Restructuring only occurs when the investor is in a position to support it.

→ vogweno@e.nationmedia.com

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