Kenya Airways (KQ), the national carrier of Kenya, has received a lifeline from the Treasury in the form of a one-year commitment to continued financial support.

This comes as a surprise, considering the government's earlier pledge to wean the airline off state funds by December 2023.

The Treasury's written commitment allows KQ to keep operating while it implements its recovery plan.

This move is significant as the airline's liabilities currently exceed its assets by a staggering Sh136.1 billion, technically making it insolvent.

However, KQ justifies its decision to operate as a going concern based on this new government support.

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The about-turn by the Treasury highlights the challenges faced in finding a strategic investor for KQ.

In December last year, Transport Cabinet Secretary Kipchumba Murkomen emphasized the government's priority of securing a strategic partner to lessen its financial burden on KQ.

The airline has already received significant government support in recent years. In the current financial year alone, KQ was allocated Sh36.6 billion for its reorganization, adding to the Sh26.6 billion received the previous year.

Additionally, the government assumed responsibility for servicing KQ's Sh63.2 billion debt owed to Tsavo Aircraft Financing LLC.

The International Monetary Fund (IMF) is aware of KQ's significant debt burden, estimated at Sh113 billion as of March 2022. Discussions are reportedly ongoing with creditors regarding potential debt servicing by the government.

The IMF was also informed about a planned $473 million direct budgetary support to KQ to clear outstanding payments and cover restructuring costs.

With the government backstopping KQ financially for at least another year, it remains to be seen if a strategic investor will be identified and if the airline can achieve sustainable profitability in the long run.