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Kenya government to guarantee $750 million in Kenya Airways debt

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By Duncan Miriri

NAIROBI (Reuters) – Kenya will offer $750 million in guarantees to Kenya Airways’ existing creditors to help the heavily-indebted carrier secure financing from other sources to complete its recovery, a cabinet document showed on Tuesday. The guarantees, approved by the cabinet, will cover $525 million owed to the U.S. Exim Bank and the rest to local lenders, said the document seen by Reuters.

The airline, partly-owned by Air France KLM and the Kenyan government, has struggled to return to profit after tourist traffic slumped four years ago following a spate of attacks by Somalia-based Islamist militants.

The government will also convert its existing loans to the carrier into equity, it said. It was not immediately clear how much it has lent the carrier, but a source at the airline said it was a “significant” amount lent over time. The plan to guarantee the existing debt will be taken to the National Assembly for approval, the government said.

“The guarantees would be in exchange for material concessions to be provided as part of the financial restructuring which would secure future funding for the company,” the cabinet document said, without giving details on the concessions.

The government views the airline as a strategic asset, supporting other industries such as tourism and encouraging investments from abroad. Several international firms have set up their regional headquarters in Nairobi to take advantage of Kenya Airways’ extensive route network on the continent. Kenya Airways ferries 12,000 passengers a day on its fleet of Boeing and Embraer planes to destinations such as Juba and Accra.

At 1012 GMT, Kenya Airways shares were down 1.5 percent at 6.65 shillings.

The government would not provide additional cash as part of the restructuring of the airline, it added.

The debt owed to the U.S Exim bank is related to the financing of the purchase of the carrier’s Boeing planes. Kenya Airways says the financial restructuring will involve restructuring debt and securing additional capital to help dig itself out of a position of negative equity, and attain a better balance between cash flow and debt repayments.


(Reporting by Duncan Miriri; Editing by Elias Biryabarema and Mark Potter)


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The 10 best African airlines

Comments (1) Africa, Business, Featured

Kenya Airways

African airlines have worked to improve safety and reliability to obtain eight spots in the top 100 global airlines, according to rating agency Skytrax.

Skytrax has published its latest survey, with 8 African Airlines falling into the “Top 100” global airlines. This is progress in a continent hardly known for its aviation prowess. Although Africa is the second largest continent, with the second largest population, it only accounts for 3% of all air traffic. High poverty rates with poor infrastructure and investment has typically stifled Africa’s air industry. Dire safety records, exorbitant fuel taxes and uncooperative governments have also compounded the problems for those who want to travel around Africa and internationally.

Fortunately for frequent flyers, there is a growing market for air travel in Africa. This is driven in part by increased business, trade and tourism along with a rising number of business “hubs” driving a demand for affordable and reliable flights routes. Back in 2012, African air traffic only accounted for 1% of all air travel and only 5 African airlines made it into the top 100 list.

Skytrax Awards: the pinnacle of safety and excellence in aviation

The Skytrax awards are a global benchmark in quality and safety and are widely known as the “Passenger’s Choice Awards” due to their selection process. Consumers from across the globe take part in a satisfaction survey to determine the winners; no external sponsorship, payment or influence alters the results.

Clear winners of the Skytrax awards are the South African airlines. Heading up the country’s list is South African Airways, a consistently well-rated airline that flies to 38 destinations and is a premier international aviation leader. Mango also made the list at number eight, a subsidiary of South African Airlines and a low-budget alternative with well-rated services and safety records. Finishing off the South African contingent is Kulula at number seven, another “no-frills” airline, operated as a franchisee of British Airways. South Africa’s reputation for business and status as a regional trading hub, coupled with its higher than average economic statistics can account for its prominent position in Africa’s aviation industry.

Luxury islands and South Africa coming out on top

Kenya Airways upsets the status quo by winning Africa’s Leading Airline at the 2016 World Travel Awards. In doing so it unseated South Africa Airways as Africa’s best airline, an award they had taken home for 22 years in a row. They also won the “Best in Business Class” award, clinching both the overall and luxury travel recognition, something many airlines struggle to do. Kenya airways has recovered spectacularly from its problematic history. Dogged by accidents in the early 2000s, “The Pride of Africa” has made great safety improvements to become a world-class airline. Kenya Airways Marketing Director, Chris Diaz explained, “This is sign enough that we are putting the dark clouds behind us to cruise unimpeded as Africa’s most respected airline.”

Air Mauritius and Air Seychelles are beaten only by South African Airways on Skytrax’ list. Their prominence as travel leaders is unsurprising due to their luxury locations and high levels of international tourism which drives expectations and assures quality. Air Mauritius has code sharing agreements with Emirates and other world class airlines, which is a certain sign of excellence, due to Emirates’ notoriously high standards in partnerships. Air Seychelles boasts Etihad as a stakeholder and was recently awarded a 4 star rating at the Skytrax awards.

All-Boeing fleets and drastic turnarounds

Ethiopian airlines

Ethiopian airlines

Also highly rated was Ethiopia Airlines, coming in at number four on Skytrax’ list. The firm also won Best Airline in Economy award at the World Travel Awards 2016. Ethiopia Airlines is the flag carrier of Ethiopia and has a strong reputation for cargo travel as well as its popular passenger air travel. TAAG Angola Airlines successfully made 2016’s list, real progress after a 2007 European travel ban and subsequent re-haul of the entire fleet and board. Now, it is has a Boeing-only fleet and has agreements with Emirates and other top-class airlines.

The airlines rounding off the top 10 are Royal Air Maroc and Air Austral. Air Maroc is fully owned by the Moroccan government and has its headquarters in Casablanca. It was formed in 1953 and also operates an all-Boeing fleet; it has now become a formidable force in African air travel. Taking risks, they were the only airline to continue flying to Sierra Leone, Guinea and Liberia amid the Ebola outbreaks, becoming an essential part of the fight against the disease and supplying the region with resources and medical staff. The last airline is Reunion Island’s Air Austral who has a particularly young fleet for African aviation, with an average age of 5.2 years. The success of these airlines demonstrates that the industry has come a long way in recent years, drastically changing the perception of African air travel.

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Kenya Airways says fixing weaknesses found after forensic audit

Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – Kenya Airways said on Tuesday preliminary results of a forensic audit had helped it identify weaknesses in its systems and internal controls, and it was taking remedial action that included disciplining some staff.

The statement, following the audit by Deloitte Consulting, did not give details about the actions taken by those staff.

The airline has been working on a turnaround plan after more than three years of financial losses.



(Writing by Edmund Blair; Editing by Mark Potter)

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