Eight local banks have shared a total of Ksh19.7 billion in repayments from Kenya Airways (KQ), marking a significant step in the national carrier’s ongoing financial restructuring.
The disbursement, made as part of a loan settlement plan, reflects a major milestone in the government-backed efforts to stabilize the struggling airline.
The repayments were made under a sovereign guarantee arrangement, where the National Treasury had committed to covering part of KQ’s legacy debt on behalf of the carrier.
This guarantee was triggered following the airline’s continued financial challenges, which have made it difficult to meet debt obligations independently.
The eight banks, which were part of a syndicated lending group that financed Kenya Airways during its earlier expansion phase, had been awaiting settlement for years.
The funds were disbursed through the Treasury following parliamentary approval for the bailout, which aimed to clear guaranteed portions of the airline’s loans and free the banks’ balance sheets from the burden of non-performing exposures.
Each bank’s share of the Ksh19.7 billion varied depending on its initial exposure to KQ’s loan portfolio. Larger lenders received higher portions, reflecting their more significant involvement in the syndicated facility.
The banks have welcomed the repayments, noting that the move restores liquidity and improves capital positions that had been under pressure due to the prolonged default risk.
The government has emphasized that the payments were necessary to prevent further financial instability within the banking sector and to protect Kenya’s creditworthiness, as the sovereign guarantee legally bound the state to honor the obligation.
Meanwhile, Kenya Airways continues with its turnaround strategy, which includes cost-cutting measures, fleet optimization, and potential partnerships with strategic investors.
The airline’s management has also reiterated its commitment to achieving long-term profitability, despite facing headwinds such as high fuel prices, forex losses, and a competitive regional aviation market.
The settlement with the eight banks provides a moment of relief for both the lenders and the government, even as KQ remains under scrutiny over its recovery progress and long-term financial sustainability.
Written By Ian Maleve
