State's Sh45.4 billion lifeline: Kenya Airways gets rescued again

The government has approved a $350 million (Sh45.4 billion) loan for Kenya Airways. It will also convert Sh122 billion in existing State loans into shares. The Cabinet-backed plan will push State ownership above 50 per cent.

The money will be released in tranches under Treasury supervision. It will be repaid over 10 years or converted into equity. It will pay for aircraft maintenance and return grounded planes to service. It will also cover urgent obligations.

The numbers

The airline is in deep trouble. It lost Sh17.16 billion in 2025, after a Sh5.43 billion profit the year before. Revenue fell 14 per cent to Sh161.47 billion. Seat capacity dropped 18 per cent.

Three Boeing 787-8 Dreamliners were grounded. They are about a third of the wide-body fleet. They carry the long-haul passengers who bring in the most revenue. Cargo also suffered, with volumes down 8.5 per cent to 64,780 tonnes.

Debt is the heaviest burden. Borrowings stood at Sh151.3 billion at the end of 2025. Cash and bank balances were just Sh5.3 billion. That leaves net borrowings of nearly Sh146 billion.

Costs keep climbing. Fleet ownership costs rose to Sh27.14 billion from Sh20.43 billion. Finance costs reached Sh12.4 billion.

The pain has continued into 2026. The first-half loss rose 31.9 per cent to Sh16 billion. Fuel costs jumped 72 per cent amid the Middle East conflict. Fuel now accounts for about half of total costs.

Who owns what

The National Treasury holds 48.9 per cent of the airline. Local lender banks own 38.1 per cent and Air France-KLM 7.8 per cent. Employees and retail investors share 5.2 per cent.

The debt-to-equity swap will shift that balance. Taxpayers will own more of the airline. They will also carry more of its risk.

Rescue without a reckoning?

The government argues the airline is too important to fail. It says Kenya Airways contributes more than $1.3 billion (Sh169 billion) a year to GDP through tourism, trade and connectivity. That argument has merit.

But this is not the first bailout. The airline has had several multibillion-shilling rescues over the past decade. Each promised a turnaround. Each left taxpayers deeper in.

Unanswered hard questions

Why were the Dreamliners grounded so long? Engine shortages and supply-chain delays are real problems. Yet other carriers faced the same pressures. Kenyans deserve a clear maintenance and fleet plan.

Will the debt swap fix anything? Converting loans to shares cleans up the balance sheet. It does not stop the losses. A lighter debt load means little if the airline keeps bleeding cash.

What happens to oversight? Majority State ownership brings the airline closer to the Treasury. History shows that closeness can blur accountability. Boards need to be strong and independent. Management needs hard performance targets.

Where is the strategic investor? The government says it wants one to speed up the turnaround. Investors want clarity. They will ask about governance, fleet strategy and what the State will keep. Public ownership above 50 per cent may make some of them hesitate.

What Kenyans should demand

The Cabinet says the funds will be released in tranches. That is sensible. But tranches only work if each release is tied to measurable results.

Parliament and the public should see:

• the full loan terms, including interest and conversion conditions;
• a dated plan for returning grounded aircraft to service;
• clear targets on losses, revenue and debt;
• a timeline for bringing in a strategic investor.

Kenya Airways is a national asset. It is also a national liability. The State has chosen to keep it flying. It now owes citizens proof that this time will be different.