By Victor Shalton
Kenya Airways Appoints Seabury Consulting as a Restructuring Advisor
Kenya Airways has appointed Seabury Consulting, part of Accenture, to advise its board on the restructuring process to be undertaken by the airline as it seeks to re-settle its debt as well as improve its revenues on a long-term business plan.
Confirming the deal, KQ Board Chairman Michael Joseph said, “They [Seabury Consulting] will assist with the restructuring as part of the financial support from the National Treasury.” Last year, the International Monetary Fund (IMF) highlighted the Importance of having an international aviation consultant to prepare an in-depth financial assessment of Kenya Airways essential for the country’s state-owned enterprises (SOE).
“Given the special circumstances and uncertainty facing the global airline industry, Kenya Airways has retained an international aviation expert to assist in defining a set of strategies for its future. Kenya Airways has experienced losses in recent years and faces significant future challenges. Sector-specific expertise will contribute to a better understanding of major trends in the regional and local aviation market, the formulation of a viable business model for Kenya Airways and ensure the consideration of all least cost alternatives for the Exchequer,” the IMF said.
Continued Government Support
While Seabury works on its report, the Kenyan legacy carrier began another painful restructuring that will see a significant number of employees getting fired as it attempts to remain airborne. This comes at a time when the Kenyan government will reportedly inject another KES26.56 billion shillings (USD233.7 million) into the cash-strapped airline in supplementary budget estimates by the National Treasury presented to Parliament recently.
This is in addition to KES53.4 billion (USD470 million) in direct budget support already allocated to the airline for the fiscal year ending June 2022, with the government having promised to absorb KES92.5 billion (USD814 million) of its debts accumulated by the end of 2020. The government last year decided to reverse earlier plans to nationalize the carrier and will instead look at other ways to safeguard money it has loaned the carrier, according to the International Monetary Fund.
The extra allocation to the airline and other parastatals constitutes the highest of the National Treasury’s extra spending of KES108.5 billion (USD954.9 million) in the fiscal year ending June 2022 as the carrier appears to be facing costly operational issues.
Kenya’s Business Daily reported the airline needs funds for the maintenance of grounded aircraft, payment of salaries, and the settling of utility bills, and to ease the effects of the COVID-19 pandemic on travel demand. Kenya Airways is at risk of running out of funds amid reluctance by commercial banks to extend further liquidity.
Towards the end of last year, Kenya Airways and South African Airways announced plans to launch a pan-African airline group by 2023 in a partnership that will see the airline duo share the exchange of knowledge, expertise, innovation, digital technologies, and best practices