Kenya Airways Ltd., sub-Saharan Africa’s third-largest carrier, expects to start receiving payments of outstanding fares from the Nigerian government within a month, Chief Executive Officer Mbuvi Ngunze said.
The company is one of several international airlines owed $600 million in foreign-denominated revenue held by the Nigerian government, Ngunze said. The carrier has been unable to collect $25 million from its sales agents in Nigeria, Angola and Sudan because of dollar shortages in the oil-producing countries.
“We should be able to start seeing a flow of cash” in July, Ngunze said in an interview Wednesday in Nairobi, the Kenyan capital. “Some of the airlines are beginning to get some money.”
Nigeria, which is grappling with the threat of recession, abandoned a 16-month currency peg on June 20 and sold $4 billion in the spot and forwards markets that day to clear a backlog of demand for hard currency.
The Nigerian government is considering proposals by the International Air Transport Association on how to reduce the balance of the money to be repatriated. Suggestions include payments in naira, Ngunze said. Kenya Airways will accept local currency settlement in the three countries.
Kenya Airways plans to cut 600 jobs after shrinking its fleet by almost a third to help reverse a 25.7 billion-shilling ($253.8 million) loss in the year through March 2015. The loss is projected to narrow this year and next as the company cuts costs and the nation’s tourism industry recovers, Citi research analyst Andrew Light said June 22 in an e-mailed note.
The airline’s shares jumped 14 percent in June, the biggest monthly increase since January 2015, according to data compiled by Bloomberg. The gains pared the stock’s loss to 11 percent so far this year.
While the company has reduced its operating losses, its full-year performance will be weighed down by higher interest repayments on loans and losses incurred from fuel-price hedges, Ngunze said.
“We have borrowed more as a business, so it means we are paying more for interest and the last part of the fuel hedges,” Ngunze said.
KQ, as the company is known, is reorganizing its balance sheet with the help of investment bank PJT Partners Inc. It’s exploring options with existing and new potential partners, Ngunze said, declining to elaborate.
Kenya’s government, which owns 29.8 percent of the airline, is considering selling part of its stake to new or existing investors within two years, Nairobi-based broadcaster Citizen reported, citing Transport Secretary James Macharia.
“Anything is possible,” he said. “There could be the possibility of new shareholders who bring a different value to the business coming in, in the future. It is still very early days. This is an interesting opportunity for us to make that assessment and that’s what we are doing.”