The Kenyan Government may consider renationalizing Kenya Airways (KQ, Nairobi Jomo Kenyatta) as a means of protecting the ailing national carrier from increasing state-backed foreign competition.
According to Bloomberg, Transport Principal Secretary Esther Koimett told a Parliamentary Committee on Transport, Public Works and Housing in Nairobi on Tuesday that the option was under consideration given Kenya Airways' continued losses.
Founded in 1977 as a state-owned entity following the break-up of the then multinational East African Airways, Kenya Airways was privatized in 1996 in the hopes of transforming the airline into a competitive carrier. However, since that time, the carrier has had to cope with an increasing number of foreign operators eager to tap into Kenya's significant tourism market, as well as currency fluctuations and regional unrest.
In 2017, as part of a debt-to-equity conversion plan, the state increased its overall shareholding from 29.8% to 48.9%. Other shareholders include a consortium of creditor banks with 38.1% and Air France-KLM with 7.8%.
“But that does not mean that it needs to remain this way,” Koimett was quoted by Bloomberg. “We can create a path that leads it to a 100% ownership by the government.”
According to her, the main hurdle to the renationalisation plan is the airline's outstanding loans, for which it is currently renegotiating repayment schedules.
The committee was due to have heard a presentation by Koimett and Kenya Airways chief executive, Sebastian Mikosz, over the carrier's plan to take operational control of Nairobi Jomo Kenyatta Airport (JKIA).
Under the deal, Kenya Airways will operate, maintain and develop the Nairobi gateway under a Privately Initiated Investment Proposal (PIIP). The aim of the project is to allow Kenya Airways to consolidate and entrench its status as JKIA's leading carrier thereby leading to cost efficiencies. With this in place, the airline believes it would be in a stronger position to compete with wholly-state-owned rivals Ethiopian Airlines, RwandAir, Air Tanzania, Uganda Airlines (tentatively) as well as Qatar Airways and Emirates.
However, according to the official KBC broadcaster, the Public Investment Committee (PIC) last week said it will recommend that Parliament issues an injunction preventing the takeover until investigations are complete.
Among the concerns cited are that the Kenya Airports Authority (KAA) was unable to furnish Parliament with cabinet meeting minutes approving the now controversial takeover.
As such, the PIC has also directed the KAA to recoup the KES15 million Kenyan shillings (USD149,790) it had paid to MMC Africa, a transaction advisor contracted to provide counsel in the project.
