Kenya's plan to takeover KQ enters final stage

Monday February 15 2021

Kenya Airways planes are seen parked at the Jomo Kenyatta International Airport near Nairobi, Kenya on March 6, 2019. PHOTO | THOMAS MUKOYA | REUTERS


Kenya Airways is moving closer to nationalisation with Parliament seeking to pass the National Aviation Management Bill 2020 that will make the airline one of three subsidiaries in a soon to be formed aviation holding company.

The State-backed Bill is one of the items on the legislative calendar released by the National Assembly Clerk Michael Sialai last week. The government had targeted to complete the process end of October last year but a section of MPs blocked the legislation in September owing to lack of public participation.

Kenya wants to emulate countries like Ethiopia, which runs air transport assets —from airports to fueling operations — under a single company, using funds from the more profitable parts to support others.

In the Bill, Kenya Airways (KQ) will be one of three subsidiaries in an aviation holding company called Kenya Aviation Corporation. The others will be Kenya Airports Authority, which will operate all the country's airports including Jomo Kenyatta International Airport (JKIA) in Nairobi, under an investment arm dubbed Aviation Investment Corporation.

Kenya Aviation Corporation will also hold the shares in the operating entities.

Nationalisation will exempt Kenya Airways from taxes on engines, maintenance and fuel, allowing it to sell cheaper tickets.


Currently, the airline charges more than competitors, forcing price-sensitive passengers to fly through hubs like Addis Ababa and Kigali.

The loss-making airline, which is 48.9 percent government-owned and 7.8 percent held by Air France-KLM, was privatised 24 years ago but sank into debt and losses since 2014.

The move by Parliament comes as the Treasury through a supplementary budget revealed Kenya Airways received $100 million in a secret bailout to avoid collapse amid the effects of Covid-19.

In the supplementary budget, KQ received $800 million directly from the Treasury and $200 million from the Transport Ministry to ease the effects of Covid-19 that has obliterated global demand for travel.

In the budget, it was not indicated when the funds were offered to the KQ and if they were in the form of equity or a loan from the government, which is in talks to buy out minority investors, including lenders and Air France-KLM.

"The $800 million is for Kenya Airways to sustain basic operation during the Covid-19/post-Covid-19 pandemic whereas $200 million is cash injection for the airline to cushion the impact of the Covid-19 pandemic which grounded its operations," read part of the revised national budget from Kenya Treasury Cabinet Secretary Ukur Yatani.

In its bid to capture cargo market, KQ last week converted two of its large passenger aircraft into freighters after it go approval from the Kenya Civil Aviation Authority (KCAA) early this month — few weeks after the US-based Federal Aviation Administration (FAA) gave the airline the greenlight for the same.

Kenya Airways Chief Executive Allan Kilavuka said the airline converted a Boeing 787 into a full-fledged freighter aircraft due to Covid-19, the demand for passengers has declined significantly while freight demand has remained steady and increased in certain cases.

"Due to decreasing demand for air travel, the carrier had previously grounded multiple 787 Dreamliners while suspending many important routes, such as Nairobi — Amsterdam, and Nairobi — Paris," said Mr Kilavuka.

At the peak of Covid-19, the airline relied on its two short-haul aircraft for transportation of cargo meant for the region where it had turned some of its Boeing 787 aircraft into freighters without removing seats to create more space.