Kenya Airways has secured government approval for a $350 million shareholder loan to help fund aircraft maintenance and other urgent operating costs, as the national carrier works to improve its financial position.

The Cabinet approved the financing on October 9, according to an announcement issued by Kenya Airways Plc. The loan, worth about 45.4 billion Kenyan shillings, will be provided in instalments under the oversight of the National Treasury.

The loan will run for up to 10 years and may be converted into equity, subject to regulatory and other approvals, the airline said.

The announcement also outlines plans to restructure a much larger portion of the government’s existing loans to the carrier, although that process has yet to be completed.

Government Plans to Restructure Sh122 Billion in Debt

The government has approved in principle the conversion of about 122 billion shillings in existing loans to Kenya Airways, including accrued interest, into an equity-qualifying tradable instrument.

The proposed move is aimed at improving the airline’s balance sheet by addressing its negative equity position. Kenya Airways said the restructuring would also strengthen its creditworthiness and support efforts to attract new investors.

The airline is seeking to improve its financial standing as it pursues a turnaround plan and explores ways to raise capital from the market.

However, the proposed debt conversion is not yet final. It requires further corporate, shareholder and regulatory approvals, as well as the completion of the relevant transaction documents.

The new $350 million loan is separate from the proposed restructuring. While the loan is intended to cover immediate operational needs, converting the existing debt would change how those obligations are reflected in the airline’s financial structure.

Aircraft Maintenance Among Immediate Priorities

Kenya Airways said the new financing would help meet operational requirements, including aircraft maintenance and returning grounded planes to service.

Aircraft availability affects an airline’s ability to maintain schedules and operate its network. However, the announcement did not state how many grounded aircraft could return to service using the funds or when that might happen.

The financing comes as Kenya Airways seeks to meet its immediate obligations while working on longer-term measures to improve its financial performance.

The government has played a significant role in supporting the carrier through loans and other financial measures. The latest proposal combines additional funding with a plan to address part of the debt already owed to the state.

Whether the measures will deliver lasting improvements will depend partly on how the funds are deployed, the progress of the restructuring and the airline’s ability to strengthen its operations.

Regulatory Clearance Remains Outstanding

Kenya Airways warned shareholders that the proposed arrangements still require further work before they can be implemented.

The outstanding requirements include approvals or no-objections from the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE), alongside any other statutory and regulatory consents that may apply.

The airline said it would provide further updates as the process advances.

It also urged shareholders and prospective investors to exercise caution when dealing in its securities until the outstanding terms have been determined and disclosed.

The announcement was signed by Habil Waswani, the airline’s acting group managing director and chief executive officer, on behalf of the board.

Investors Await Details of the Deal

Important details remain unresolved, including the schedule for disbursing the loan, the conditions under which it could be converted into equity and the timetable for completing the proposed restructuring of existing government debt.

These details will help shareholders and potential investors assess how the arrangements could affect the airline’s finances and ownership structure.

For Kenya Airways, the immediate priority is to secure funding for its operations while moving forward with the proposed balance-sheet changes. The longer-term test will be whether the measures help the carrier improve its financial position and attract additional investment.

The airline said it would continue to update shareholders, regulators and the investing public on material developments as the necessary approvals and agreements are completed.