The Cabinet has approved an additional $350 million (Sh45.4 billion) worth of shareholder loans to Kenya Airways as an urgent measure to help the airline meet its financial obligations.
A statement from the Cabinet said the funds will be disbursed in stages under the oversight of the National Treasury which holds a 48.9 percent stake in the national carrier.
The loans will be repaid over 10 years and could be converted into shares of the Nairobi Securities Exchange-listed firm.
The Cabinet also approved the proposed conversion of Sh122 billion worth of accrued interest and loans advanced by Treasury to Kenya Airways into “an equity-qualifying tradable instrument” to strengthen the airline’s balance sheet.
The statement did not explain the details of the equity-qualifying instrument. The Sh45.4 billion new shareholder loans, if converted into shares of the national carrier, will substantially raise the government’s stake in the company and entrench its control as other investors such as KLM (with a 7.76 percent stake) are diluted.
The additional financial support to KQ, as the carrier is known by its international code, comes amid delays in addressing its debt woes through other means including bringing in a strategic investor.
KQ’s multi-year losses has seen it rely more heavily on the government without whose support it would have been unable to continue operating.
“The measures form part of Kenya Airways’ long-term turnaround plan and are intended to safeguard an airline that contributes more than $1.3 billion (Sh168.6 billion) annually to Kenya’s GDP through tourism, trade and regional connectivity,” the Cabinet statement reads in part.
“Implementation remains subject to the necessary corporate, shareholder and regulatory approvals.”
The new loans will expand the airline’s indebtedness to the Treasury. The government had provided loans worth Sh131.48 billion as of December 2025, rising from Sh108.3 billion a year earlier.
The fresh funding comes as KQ faces a renewed financial squeeze after recording a Sh17.16 billion net loss in 2025, reversing a Sh5.43 billion profit the previous year.
The airline’s revenue fell 14 percent to Sh161.47 billion last year, while available seat capacity shrank 18 percent, largely because three Boeing 787-8 Dreamliners were grounded.
The aircraft shortage cut the airline’s ability to carry passengers and cargo, with cargo tonnage falling 8.5 percent to 64,780 tonnes in 2025, according to its annual report.
The grounding of three Dreamliners represented about a third of the carrier’s wide-body fleet, limiting capacity on long-haul routes that are important for international passenger traffic and revenue.
The disruption has persisted amid global supply-chain constraints, engine availability problems and delayed spare-parts deliveries, leaving maintenance schedules vulnerable to delays beyond the airline’s direct control.
KQ’s 2025 accounts show operating costs remained high despite reduced flying, with fleet ownership costs rising to Sh27.14 billion from Sh20.43 billion a year earlier.
The carrier also recorded finance costs of about Sh12.4 billion in 2025, reflecting the burden of borrowing, aircraft leases and currency-related expenses on its already strained finances.
Its borrowings stood at Sh151.3 billion, against cash and bank balances of just Sh5.3 billion, leaving net borrowings of almost Sh146 billion at the end of last year.
The proposed financing follows another difficult period in 2026, with KQ reporting a 31.9 percent jump in net losses to Sh16 billion in the first half, up from Sh12.2 billion a year earlier.
Fuel costs rose 72 percent during the first half of 2026 amid the Middle East conflict, accounting for as much as half of the airline’s total costs.
The conflict also disrupted deliveries of spare parts and maintenance services, adding pressure to an airline already struggling to restore aircraft and take advantage of passenger demand.
The carrier connects Nairobi with international and regional markets, while its cargo operations support the movement of goods, including time-sensitive exports, linking airline capacity to wider commercial activity.
