Kenya Cabinet endorses proposed conversion of KSh 122 billion in Kenya Airways loans

Kenya's Cabinet on 9 October endorsed the proposed conversion of KSh 122 billion in government loans to Kenya Airways, plus accrued interest, into an equity-qualifying tradable instrument, Citizen Digital reported the same day.

The Cabinet met at State House, Nairobi. It also approved US$350 million in shareholder financing for the airline, about 2.36 billion yuan at the 9 October central parity rate of 6.733 yuan to the dollar. Implementation of the measures is subject to corporate, shareholder and regulatory approvals.

Business Daily reported on 9 October that the statement did not explain the details of the instrument. The National Treasury holds 48.9 per cent of the airline. If the shareholder loans for the new financing are converted into shares, the government's stake would rise and investors such as KLM, with 7.76 per cent, would be diluted.

Kenya Airways posted a pre-tax loss of KSh 15.92 billion (about US$123.08 million) for the first half of 2026, against KSh 12.17 billion a year earlier, Reuters reported on 25 August. The rate used was KSh 129.35 to the dollar.

Revenue rose about 9 per cent to KSh 81.2 billion from KSh 74.5 billion. Fuel cost KSh 29 billion, up 66 per cent from KSh 17.47 billion.

Chief Financial Officer Mary Mwenga attributed the higher costs to the Middle East crisis. "Our costs increased significantly because of the Middle East crisis, which increased our fuel costs," she said.

Chairman Kiprono Kittony said: "What Kenya Airways faces today is not a demand problem but a capacity problem."

For the full year 2025, the airline made a net loss of KSh 17.16 billion, against a profit of KSh 5.43 billion in 2024. Revenue fell 14 per cent to KSh 161.47 billion, and available seat capacity shrank 18 per cent after three Boeing 787-8 aircraft were grounded. Borrowings stood at KSh 151.3 billion against cash of KSh 5.3 billion.

Kenya Airways shares closed unchanged at KSh 5.76 on the Nairobi Securities Exchange on 9 October, up 63.2 per cent since the year opened at KSh 3.53, The Star reported on 12 October.

The airline is seeking at least US$1.5 billion (about KSh 194 billion) in fresh capital. Kittony said in August that fundraising should conclude by the first quarter of 2027.

The Treasury told Parliament that the search for a strategic investor "is currently ongoing and is targeted to be finalized by December 2026". It was replying to a follow-up by the National Assembly's Public Accounts Committee on its recommendation that the Treasury Cabinet Secretary submit a debt management and exit strategy for the airline.