The Nairobi Securities Exchange (NSE) has announced that it will extend the suspension of trading of Kenya Airways Plc shares for another year, starting from January 5, 2024.
The decision was made in consultation with the Capital Markets Authority (CMA), the regulator of the securities market in Kenya.
The extension of suspension is aimed at facilitating the completion of the operational and corporate restructuring process of the national carrier, which has been facing financial and operational challenges for several years. The restructuring process involves a radical overhaul of the airline’s business model, cutting back on its operations and staff, enhancing efficiency and renegotiating leases and suppliers’ contracts.
The suspension of trading of Kenya Airways shares was first imposed on July 3, 2020, for a period of three months, following the approval of the National Assembly to nationalize the airline.
The nationalization plan was part of the Kenya Air Transport Management Bill, which proposed to create a holding company that would own Kenya Airways, the Kenya Airports Authority (KAA) and a new aviation investment arm.
However, the nationalization plan was delayed by legal and regulatory hurdles, as well as the impact of the Covid-19 pandemic, which severely affected the aviation industry worldwide. The suspension of trading of Kenya Airways shares was subsequently extended several times, with the latest extension being the fifth one.
According to the NSE, the extension of suspension is in line with section 11(3) (w) of the Capital Markets Act and regulation 22 of the Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulations, 2002.
These provisions allow the CMA to suspend trading of a listed company’s securities if it is in the public interest or for the protection of investors.
The NSE confirmed the suspension will not affect the listing status of Kenya Airways, and that the company will continue to comply with its continuing listing obligations, including the disclosure of material information. The NSE is advised all shareholders, investors and the general public to take note of the suspension and exercise caution when dealing in the company’s securities⁴.
Kenya Airways, which is one of the largest airlines in Africa, has been struggling to return to profitability since 2014, when it posted a record loss of Ksh.25.7 billion (USD254 million). The airline’s woes were worsened by the acquisition of a costly fleet of Boeing 787 Dreamliners, which increased its debt burden and operational costs.
KQ also faced stiff competition from regional and international rivals, such as Ethiopian Airlines, Emirates and Qatar Airways.
In 2017, Kenya Airways completed a debt restructuring deal worth USD2 billion, which saw the Kenyan government and 11 local lenders convert their loans into equity, increasing the government’s stake in the airline from 29.8% to 48.9%.
The deal also involved the participation of the airline’s major shareholders, KLM Royal Dutch Airlines and the International Finance Corporation (IFC), as well as the conversion of some debts into long-term loans.
In 2021, Kenya Airways received a USD91.4 million loan from the Kenyan government as part of a Covid-19 stimulus package, which helped the airline to pay its employees and suppliers, as well as to maintain its fleet.
KQ also received a USD750 million guarantee from the government to secure new financing from external creditors.
Despite the financial support, Kenya Airways reported a net loss of Ksh.36.2 billion (USD337 million) for the year ended December 31, 2020, compared to a net loss of Ksh.12.9 billion (USD120 million) in 2019.
The airline’s revenue declined by 59% to Ksh.52.8 billion (USD491 million), while its operating costs decreased by 37% to Ksh.73.6 billion (USD685 million). The airline attributed the poor performance to the disruption caused by the Covid-19 pandemic, which led to the suspension of domestic and international flights for several months.
In 2022, Kenya Airways resumed its operations gradually, as travel restrictions were eased and demand for air travel recovered. The airline also implemented various cost-cutting and revenue-enhancing measures, such as reducing its workforce, renegotiating its contracts, optimizing its network and fleet, and expanding its cargo and charter services. The airline also launched new routes to destinations such as Rome, Geneva, Malindi and Lamu.
According to the International Monetary Fund (IMF), Kenya Airways is expected to undergo a deep restructuring that will replace the nationalization plan. The restructuring will involve the government taking over USD827 million of the airline’s debt, as well as providing USD473 million as direct budgetary support for the 2022 and 2023 fiscal years.
The restructuring will also require the approval of the airline’s creditors and shareholders, as well as the enactment of the necessary legislation.
The IMF stated that the restructuring of Kenya Airways is critical for the recovery of the Kenyan economy, which relies heavily on the aviation sector for trade, tourism and investment.
According to the IMF, the restructuring will minimize the burden that the airline places on the state, and will enable the airline to become more competitive and sustainable in the post-pandemic environment.
