Africa: Kenyan Lawmakers Propose Nationalization of Kenya Airways

Kenya advisory skies domestic airlines cape mombasa

Kenya’s parliamentary transport committee proposed the nationalization of Kenya Airways Plc after rejecting the airline’s proposal to allow it to manage the nation’s biggest airport.

The committee proposed creating a holding company with four subsidiaries including the carrier and the Jomo Kenyatta International Airport, according to a report tabled in the National Assembly on Tuesday. The other two units are the state’s Kenya Airports Authority and an aviation college.

Sub-Saharan Africa’s third-largest airline, which reported a 5.95 billion shillings ($59 million) full-year loss, has lost market share to regional rivals like Ethiopian Airlines and RwandAir. Kenya Airways is seeking ways to promote its base in the East African nation’s capital, Nairobi, as a regional hub and return to profitability, even if that means it being nationalized.

The airline is 48.9% owned by the Kenyan government and 7.8% by Air France-KLM. A group of 11 lenders collectively own 38.1% of the company after they converted their loans into equity in 2017. The company’s workers and retail investors own the rest of the entity.

Airport Proposal
The plan would entail delisting Kenya Airways and buying out of other shareholders, the lawmakers said in the report. The National Assembly is required to adopt the committee’s report before the government can implement it.

The airline unsuccessfully proposed that the government allows it to participate in operating the nation’s biggest airport. The proposal required Kenya Airways to invest in the airport and keep part of the income from the facility.

After lawmakers and the airports authority rejected the proposal, the airline said it was open to a model similar to Emirates Airline and Ethiopian Airlines, which operate as units of state-owned holding companies. Kenya Airways has 53 routes, less than half of those operated by Ethiopian Airlines, according to the report.

The proposal to nationalize the entity — which comes with a raft of tax exemptions — will boost the airline’s competitiveness in a region where it has ceded market share to state-owned rivals, the lawmakers said.

By David Herbling
Source: bloomberg.com

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