KQ Chief Executive Officer Mbuvi Ngunze said the airline was renegotiating its local loan repayment schedules with the local commercial banks to allow it return to full profits.

Kenya Airways
Kenya Airways
“The structuring of the business will take time. We have a turnover plan in motion. Our cost reduction measures will take time to show results. Our turnaround plan has taken into consideration all these issues (financial restructuring). It is being implemented,” Ngunze told investors in Nairobi.

The airline announced unaudited results for the third quarter to ended Sept. 30, showing a massive reduction in the cost of operations from 412 million dollars in 2014 to 340 million dollars this year.

The airline, which has been recording reduced profits and high costs of operations for the last four years, remains optimistic of a quick recovery.

To stay on the airspace, the airline earmarked a few aircraft for sale after purchasing modern aircraft, which led to high costs of finance.

“We shall negotiate for the longer-term repayment period for the loans,” the airline’s finance director Alex Mbugua said.

The airline said it was forming a Special Purpose Vehicle to help it finance the acquisition of new aircraft. The Special Purpose Vehicle would be tasked with the management of the company’s assets pending repayments.

The national carrier has obtained special loans of 200 million dollars to shore up its books in the short-term. The airline hopes to narrow the losses it has incurred before starting its march towards profitability.

Ngunze said the airline sold off some of its fleet, which resulted into an 8 percent drop in capacity. However, the passenger load factor improved.

“We recognize the business is in need of some restructuring. We obtained a loan from the Africa Exim Bank and we have withdrawn 100 million dollars. We still wait for the receipt of some aircraft sales,” Ngunze said.

The airline is looking at the implementation of a new finance strategy that would see its debt repayment pushed or redistributed from one to seven-year repayment period, the finance director said.

The airline owes 1.12 billion dollars in debts to banks and other creditors. The bank decried the high cost of short-term finance, which pushed its financing costs to double to 33 million dollars from 16.5 million.

Airline executives attributed the rising cost of finance to the firm’s resorting to short-term finance. The airline has also been carrying out staff rationalization, which saw several employees sent home. Enditem

Source: Xinhua

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