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 being undertaken by the airline in restructuring its debt as well as advising the board on growing 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.”
According to the IMF, the retention of an international aviation consultant to prepare an in-depth financial assessment of Kenya Airways was highlighted as essential for the country’s state-owned enterprises (SOE) strategy as reported by the multinational agency in June 2021.
“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.
While Seabury works on its report, the Kenyan legacy carrier is set to begin another painful restructuring that could see a significant number of employees getting fired as the airline seeks to remain airborne.
Meanwhile, the Kenyan government also plans to inject another 26.56 billion Kenyan shillings ($233.7 million) into the cash-strapped airline according to a supplementary budget estimates by the National Treasury presented to Parliament recently.
This is on top of 53.4 billion shillings in direct budget support already allocated to the airline for the fiscal year ending June 2022, with the government having promised to absorb 92.5 billion shillings of its debts accumulated by the end of 2020.
The extra allocation to the airline and other parastatals constitutes the highest of the National Treasury’s extra spending of 108.5 billion shillings in the fiscal year ending June 2022, aimed at alleviating unforeseen expenditure due to a drought in parts of the country, security, a petrol subsidy, payments for Covid-19 vaccines, and a general election in August, Treasury Cabinet Secretary Ukur Yattani told the Kenyan Parliament. It also represents a 3.3% increase in the national budget presented in April 2021, thus raising the country’s fiscal deficit from 7.5% of gross domestic product to 8.1%, reported Business Daily.
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.
The government last year decided to reverse earlier plans to nationalize the national carrier and will instead look at other ways to safeguard money it has loaned the carrier, according to the International Monetary Fund.