Khafafa: Kenya Airways needs Sh260 billion boost to stay competitive

Kenya Airways is facing renewed financial strain as thin industry margins and limited access to affordable capital continue to weigh on its recovery, according to policy analyst Leonard Khafafa. Speaking on Radio Generation on Wednesday, Khafafa warned that without a major capital boost, the national carrier’s efforts to stabilize and expand will remain restricted, especially in an industry where even minor disruptions can wipe out profits.

Khafafa described aviation as a “thin margins industry,” noting that globally, even well-run airlines operate on margins of about 3.9 percent. He added that conditions are far tougher in Africa, where airlines often manage margins of 1 percent or less due to high operating costs and structural challenges.

“Anything small, any rocking left, right or center, affects those margins,” he said, pointing to how easily profitability can be eroded.

He backed his argument with projections from the International Air Transport Association, which show African airlines earning about $1.3 per passenger, roughly Sh170.

“African airlines are expected to make 170 shillings only,” he said, explaining that such narrow returns leave carriers highly exposed to shocks.

Khafafa compared Kenya Airways’ situation with that of global competitors like Emirates and Ethiopian Airlines, highlighting the role of strong government backing in their resilience. He said the Ethiopian government includes direct funding for its airline in the national budget, while Emirates received about $4 billion in grants after COVID-19. Singapore Airlines secured $19 billion in support, and American Airlines benefited from a $56 billion industry package.

“These are grants,” Khafafa explained, drawing a clear distinction with Kenya Airways’ experience. “The bailouts were essentially loans that were given by the government as the largest shareholder, and these loans were repayable at interest… they were not grants, they were loans.”

According to him, this approach has limited the airline’s ability to fully recover and grow after the pandemic. He said Kenya Airways requires at least $2 billion, about Sh260 billion, to recapitalize, fix its balance sheet, and invest in new aircraft and equipment.

“With whatever operational excellence you have… without funds, there’s nothing,” he said.

Khafafa also recalled past setbacks that slowed the airline’s progress, including delays in government approvals during fleet expansion, the Westgate Mall attack, Ebola-related disruptions in West Africa, and infrastructure challenges at Jomo Kenyatta International Airport.

While he acknowledged that government attention has been focused on wider economic pressures and limited fiscal space, he cautioned that without consistent and affordable funding, the airline will struggle to compete with rivals that continue to benefit from strong state support.

The concerns come as Kenya Airways posted a net loss of Sh17.2 billion for the financial year 2025, reversing a Sh5.4 billion profit recorded in 2024. Total income dropped by 14.3 percent to Sh161.5 billion, while operating costs only reduced slightly, leading to an operating loss of Sh5.6 billion.

Pre-tax losses widened to Sh17.9 billion, and total liabilities rose by 6 percent to Sh315.3 billion, leaving the airline with negative equity of Sh132.1 billion. The carrier linked the performance to “unprecedented operational constraints” affecting the aviation sector.