Kenya: Airlines Fly Into Covid-19 Turbulence Once Again

Kenyan airlines do not foresee a quick financial rebound after being hit by another domestic flights ban to counter a third wave of the Covid-19 pandemic.

The setback comes hardly months after coming out of the seven months grounding during the peak of the pandemic last year.

Kenya Airways (KQ), its low-cost subsidiary Jambojet and Skyward Express have suspended domestic flights until further notice to comply with the government directive announced on March 26.

Kenya's President Uhuru Kenyatta's national address was a blow to airlines, and especially the national carrier, Kenya Airways, which had just announced the biggest loss in its history.

Kenya Airways reported about $330 million net loss, the worst ever in the history of the airline, on account of Covid-19 disruptions that led to a sharp decline in passenger numbers.

The airline announced the suspension of all domestic flights despite high bookings for the Easter holiday peak, concentrating on international flights as directed by the president.

"The airline has suspended domestic flights until further notice. International flights remain unaffected," the airline said in a statement.

The loss-making national airline had projected to increase the number of trips to local destinations as one of the company's strategies to recover from the effects of the pandemic.

But in a bid to save the airline, the government has now exempted the airline from paying the minimum tax set at one percent of gross turnover, saving the cash-strapped airline hundreds of millions of shillings annually.

National Treasury Secretary Ukur Yatani in a Kenya Gazette notice dated March 17, announced plans to exempt the airline to save the airline from paying millions in tax.

"In exercise of the powers conferred by section 13 (2) of the Income Tax Act the CS for National Treasury and Planning directs that the income derived from or accrued in Kenya by an airline in which the government of Kenya owns at least 45 percent of its shares, and the subsidiaries of that airline shall be exempted from the provisions of Section 12 (d) of the Act," Mr Yatani said in the notice.

Without the protection, Kenya Airways was scheduled to make its first minimum tax payment by April 20, covering the first three months of its current financial year.

The tax exemption means that the national carrier will now only pay income taxes when it returns to profitability in the future. The tax shield will be extended to the airline's subsidiary, the low-cost carrier, Jambojet, which flies to domestic destinations.

For KQ, the tax exemption is the latest financial assistance it has received from the government that is keen on keeping it afloat despite mounting losses.

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