The Kenyan government has agreed to convert Kenya Airways debt of over $400 million into equity, increasing its stake in the flag carrier from 29.8% to 48.9%. Under the agreement, around of 87% of the airline would belong to Kenyan government and banks.

The financially troubled Kenya Airways has suffered five years of losses, reaching peak debt in the fiscal year that ended in March 2015, when it reported $252 million loss – the worst in the carrier’s history. Figures dropped even lower, to $257 million, in March 2016.

Since then, the airline turnaround plan was introduced in addition to vast changes in the airline’s top management positions. In June 2017, the airline appointed Sebastian Mikosz as new Chief Executive Officer.

In July 2017, a turn-around plan was introduced, intending to turn the debt into equity and create a stock split to raise more funds. As foreseen in the plan, the Kenyan government, that has already supported the airline with $1.9 million loans, is becoming the biggest shareholder of Kenya Airways with a stock share increase from 29.8% to 48.9%. KQ Lenders – a newly created entity, composed of share-holding banks, will own a 38.1% stake.

The overhaul plans came to question when the High Court of Kenya ruled in favor of the reinstatement of the former finance director Alex Mbugua, who was dismissed in January 2016, and ordered the airline to pay out his paid three-years’ salary in addition to compensation. Besides the financial aspect, which is difficult to the struggling airline, the decision also raises questions about the new management’s abilities to live up to its ambition to turn the airline’s finances around with the help of newly formed top management team.