Kenya Airways (KQ), often regarded as one of Africa’s leading airlines, made a remarkable comeback to the Nairobi Securities Exchange (NSE) this week after a suspension lasting over four years. This relisting has sparked a wave of optimism among investors, with shares of the airline opening at Sh6 (4.6 US cents) and eventually stabilizing at Sh4.76 (3.7 US cents) per share by midweek. This valuation places Kenya Airways’ market capitalization at an impressive Sh25.21 billion ($193.67 million).
Kenya Airways was suspended from trading in July 2020 amidst efforts to nationalize the airline as a response to mounting debts and the devastating impact of the COVID-19 pandemic on global travel. At the time of suspension, its shares traded at Sh3.83 (3 US cents). However, the nationalization effort was ultimately abandoned, especially after the airline began showing signs of recovery under the leadership of President William Ruto’s administration in 2022. Ruto’s government shifted focus toward privatization, marking a pivotal shift in the airline’s strategy.
The return to the bourse coincides with Kenya Airways’ first profitable financial year in over a decade. The airline reported a profit of Sh513 million ($3.96 million) in the first half of 2024, fueled by a 22% increase in revenue to Sh9 billion ($69.5 million). Passenger numbers also rose by 10%, reaching 2.54 million, signaling growing confidence in its services.
“The suspension on the trading of Kenya Airways PLC shares was lifted following the company’s recent performance, which saw the company record a profit after tax and the withdrawal of the National Aviation Management Bill 2020,” stated the NSE.
Kenya Airways’ resurgence has been credited to a comprehensive turnaround strategy focused on cost reduction, operational efficiency, and financial restructuring. Measures to reduce overheads by 22% and ease its debt burden have proven instrumental. According to CEO Allan Kilavuka, these efforts were accompanied by enhanced customer service and core operational improvements, allowing the airline to compete more effectively in a challenging industry.
The Kenyan government played a crucial role in stabilizing the airline’s finances by converting a significant portion of its dollar-denominated debt into local currency. This move reduced the financial strain caused by exchange rate fluctuations. The government currently holds a 48.9% stake in the airline, while other stakeholders include local commercial banks (38.1%), KLM Royal Dutch Airlines (7.8%), and minority shareholders (2.8%).
Despite its profitability, Kenya Airways faces significant challenges, particularly its negative book value, which stood at Sh123.6 billion ($954 million) as of the latest financial report. This figure reflects the cumulative impact of years of financial losses, serving as a sobering reminder of the airline’s precarious position.
Financial analysts have urged caution. Ronny Chokaa of Capital A Investment Bank noted, “The improved turnaround of KQ sets the pace for investors to price in the recovery performance going forward. But the company’s biggest problem may be the negative book valuation that may slow down the bullish activities of the stock.”
To sustain its recovery and solidify its financial standing, Kenya Airways is actively seeking a strategic investor. The government has expressed readiness to cede its majority stake to a partner capable of driving long-term growth. However, while negotiations appear to be ongoing, no formal agreements have been announced yet.
The relisting of Kenya Airways on the NSE symbolizes a new chapter for the airline. Its recent financial performance, combined with strategic restructuring, has instilled renewed confidence among stakeholders. While challenges such as addressing the negative book value remain, the airline’s trajectory signals a potential resurgence as one of Africa’s most iconic carriers.
Investors and industry watchers will closely monitor Kenya Airways’ next moves, particularly its pursuit of a strategic partner and efforts to maintain momentum in an increasingly competitive global aviation landscape.
