“The new investor is expected to inject a minimum of $1.2 billion and up to $2 billion into the business,” Mbadi told reporters in the capital. “We shall be rolling out an international expression of interest to search for a strategic partner.”
The announcement comes as Kenya fulfills commitments made to the International Monetary Fund to find private capital for the airline, which has struggled with profitability for more than a decade despite multiple government bailouts and debt restructuring efforts.
Government Debt Conversion Strategy
The Treasury has positioned itself to facilitate the deal by converting existing government loans into equity once a strategic investor is secured. Mbadi revealed that the government assumed Sh63.1 billion in debt from the so-called Tsavo facility novation, which it currently services through an on-lending agreement with Kenya Airways.
“The government then signed an on-lent agreement with KQ. This amount can be converted to equity once we firm up the onboarding of a strategic investor,” Mbadi explained, though he declined to provide specific details on the ownership structure under consideration.
Earlier proposals suggested linking the airline turnaround to an investor-led upgrade of Jomo Kenyatta International Airport, Kenya’s main aviation gateway. The model drew comparisons to Dubai International Airport, where Emirates Airlines operates as the anchor tenant in a symbiotic relationship with airport infrastructure managed by the same government owner.
However, the Treasury has not clarified whether this arrangement remains part of the current strategy, particularly after Kenya abandoned a controversial public-private partnership deal with India’s Adani Group that would have involved JKIA upgrades.
“We are looking for the least disruptive option with restructuring set to occur within the framework of current financial and lease licenses agreements,” Mbadi said. “The onboarding of a strategic partner can bring not just financial resources but expertise and best practices in running a successful airline.”
Mounting Financial Pressures
Kenya Airways’ financial situation has deteriorated significantly in recent months, with the carrier posting a half-year loss of Sh12.15 billion for the period ending June 2025, compared to a profit of Sh634 million in the same period the previous year. The company’s negative equity position worsened to Sh129.5 billion from Sh118.2 billion year-over-year.
At the end of June, the airline’s total liabilities stood at Sh309.9 billion against assets of just Sh180.3 billion, underscoring the magnitude of the financial challenge facing potential investors. The airline attributed the loss to reduced revenue and passenger numbers after three Boeing 787-8 Dreamliners were grounded for extended maintenance.
The brief profit recorded in the first half of 2024 represented the airline’s first positive results in more than a decade, raising hopes of a sustained turnaround that have since been dashed by operational setbacks and market pressures.
Industry analysts suggest the government will need to provide significant incentives to attract credible investors willing to take on such substantial financial obligations. Eric Musau, head of research at Standard Investment Bank, said the proposal faces credibility challenges in the current market environment.
“The proposal is reasonable, but the challenge will be getting an investor to commit funds and realize a return on investment,” Musau said. “The government can add something to go along with the deal such as offering KQ airport terminals to the investor.”
Musau emphasized that any investor should contribute equity rather than additional debt to avoid further burdening the airline with unsustainable liabilities. “The investor must also put in equity and not debt to avoid saddling KQ with even more liabilities,” he said. “An equity investor will also help with the running of the company.”
Previous Restructuring Efforts
The search for a strategic investor represents the latest chapter in Kenya Airways’ long struggle for financial stability. In 2017, the government and 11 major Kenyan banks, including KCB, Equity Bank, Cooperative Bank and NCBA, converted billions of shillings in debt into equity in an effort to return the carrier to profitability.
That debt-for-equity swap increased the government’s stake to 48.9 percent from 29.8 percent while giving banks a combined 38.1 percent stake through a special purpose vehicle. The restructuring diluted Air France-KLM’s ownership from 26.7 percent to just 7.8 percent, ending the French-Dutch airline’s role as a strategic partner.
The airline plunged into insolvency in 2018 after an aggressive expansion drive left it burdened with hundreds of millions of dollars in debt. Since then, it has relied on continuous state financial support, with the government paying off Sh19.4 billion in commercial bank loans in January 2024 alone.
Failure to secure a strategic investor remains one of Kenya’s unfulfilled commitments under its lending program with the Washington-based IMF, which has pressed the government to reduce its exposure to state-owned enterprises and find private-sector solutions for struggling parastatals.
Market Reaction and Leadership Changes
News of the strategic investor search has energized trading in Kenya Airways shares on the Nairobi Securities Exchange, with the stock price rising 42.7 percent since January to Sh5.04 per share, giving the airline a market capitalization of Sh28.6 billion.
Market speculation has centered on potential interest from Middle Eastern carriers, though no formal bids have been disclosed. The investor search comes amid leadership turnover at Kenya Airways, with Chief Executive Allan Kilavuka departing in November and Chairman Michael Joseph leaving in June.
Strategic Options and Uncertainties
The Treasury’s decision to pursue an international expression of interest suggests a desire for competitive bidding and transparency, though the timeline remains unclear. Government officials have not specified when the EOI will be launched or how long the selection process might take.
Key uncertainties include the ownership structure the government will accept and what role existing shareholders might play in any restructuring. The government’s willingness to convert debt to equity and bundle airport assets suggests flexibility but also highlights limited options given the airline’s financial condition.
As Kenya Airways continues losing money, the urgency of securing a strategic investor grows. The airline’s ability to maintain operations depends on resolving its capital crisis while preserving its role as a key component of Kenya’s transportation infrastructure and economic development strategy.
