Why Kenya Airways Is Still in Financial Trouble Years After Its Bailout

In 2017, Kenya Airways was drowning in debt. To keep the airline alive, the government and 11 banks including KCB Group and Equity Group Holdings converted billions owed to them into shares. The government’s stake jumped from 29.8% to 48.9%. The banks took 38.09% through a vehicle called KQ Lenders, while Air France KLM, once the second largest shareholder at 26.7%, was diluted down to 7.76%.

That was supposed to be the reset.
Nine years later, KQ’s debt to the government has ballooned to Sh131.4 billion. The airline failed to pay Sh8.5 billion in interest due in June 2025. The Treasury waived the amount. It is now the fourth straight year that interest obligations have been forgiven.
The airline posted a net loss of Sh17.1 billion in 2025, pushing accumulated losses to Sh206.8 billion. Negative equity now stands at Sh132 billion,meaning in a liquidation scenario, shareholders would likely walk away with nothing.

The banks that took shares in 2017 have now started selling. KQ Lenders has offloaded 104 million shares on the NSE, reducing their stake from 38.09% to 36.3%, the first time those shares have been traded since the swap. Remember, these banks didn’t buy KQ stock because they believed in the airline. They accepted shares instead of writing off bad loans and yet, KQ’s share price has climbed more than 30% over the past year, giving the airline a market value of Sh34.5 billion.

Why? Investors are betting on a new government backed rescue involving a strategic investor expected to inject up to Sh258 billion. The hope is that such a deal could reprice the stock upward. But the terms remain undisclosed and the 2017 restructuring already showed what happens when debt was converted to equity,Air France KLM’s stake was diluted from 26.7% to 7.76%. If Sh258 billion in fresh capital enters a company with negative equity of Sh132 billion, the dilution could be far worse.

So here we are. The banks are selling exactly as intended. The shares they received in 2017 were never meant to be long term investments, but a way to recover part of the debt used to keep KQ alive. KQ itself confirmed the banks are trading on the NSE within “pre-sanctioned thresholds.” In other words, this was always part of the arrangement. The banks are simply recovering what they can.

Meanwhile, the government is stuck. It cannot also convert its Sh131 billion debt into equity without crossing the 50% ownership threshold and breaching shareholder agreements. Yet retail investors are still paying Sh5.94 for shares in a company with negative equity of Sh132 billion.