Kenya appears to have moved away from plans to nationalise flag carrier Kenya Airways but still intends to provide financial support for its restructuring.

Plans have long been in the works to nationalise the ailing carrier, but legislation supporting the move has struggled to make it through the country’s parliament.

Kenya Airways 737

Source: Pierre-Yves Babelon/Shutterstock

Now the International Monetary Fund (IMF), in a review related to wider credit support it is providing Kenya, has disclosed that the authorities do not intend to nationalise the carrier and are considering ”appropriate mechanisms” to protect their financial interests in the airline.

“The authorities are developing plans to restructure Kenya Airways and anticipate providing significant financial support over the medium term,” the IMF writes in its update.

It says much of the restructuring cost for Kenya Airways is unavoidable because the state has previously guaranteed $750 million in debt owed by the airline. The carrier, further hit by the pandemic, has since has run large arrears.

The IMF says the Kenyan government, citing the economic benefits of having a national airline, is undertaking a multi-year restructuring of the airline.

”The restructuring plan aims to enable Kenya Airways’ adaptation to the challenges facing the aviation industry in the post-Covid pandemic environment. Kenya Airways will be required to trim down its network, rationalise frequencies of flights, operate a smaller fleet, and rationalise its staff complement,” the IMF says.

”It will be essential to ensure that all parties are aligned, committed, and motivated to deliver on this strategy,” it adds.

The IMF says the Kenyan Government is taking over $827 million of the airline debt and will, over this and the carrier’s next financial year, provide $473 million as direct budgetary support to help clear overdue payments and cover restructuring costs.

Kenya Airways posted a further KHs11.5 billion ($101 million) loss in the first half of 2021, as revenues and passenger numbers remained 53% and 63% down on pre-crisis levels respectively.

Last month the carrier signed a “strategic partnership framework” with South African Airways with view to creating a pan-African airline group.