Kenya’s government is close to taking over the country’s main airline, Kenya Airways (KQ) after receiving parliament’s backing on Tuesday, July 24 2019. The majority of lawmakers in the national assembly voted to accept a transport committee report on nationalisation which was debated by the national assembly on June 18, 2019.
The unprofitable airline, jointly owned by the government and Air France-KLM (48.9 and 7.8 percent respectively) has been struggling to return to profitability and growth amid mounting debts. KQ was forced to restructure a $2 billion debt in 2017 owing to a failed expansion plan and a dip in air travel.
To boost its revenue, the airline later proposed to take over Nairobi’s main airport, the Jomo Kenyatta International Airport (JKIA). However, parliament’s transport committee rejected the plan, recommending instead the nationalisation of the airline.
The passage of the report now means the government will be forced to pay off KQ debtors in a bid to pave way for the takeover of the carrier. The troubled airline reportedly owes CBA Group Sh3.1 billion, Equity Bank Sh5.2 billion, National Bank Sh3.5 billion, Co-operative Bank Sh3.3 billion, DTB Bank Sh3.3 billion and KCB Group Sh2.1 billion.
According to the Principal Secretary at the Ministry of Transport, Esther Koimett, the government will now draft an implementation plan with clear timelines after receiving parliament backing. “Parliament is our boss,” she said. “We will obviously take the recommendations of parliament.” The committee’s report also recommends that Kenya Airport Authority, Jomo Kenyatta International Aviation, and Kenya Airways to be put under Kenya Aviation Holding Group.
With the nationalisation strategy, Kenya is following in the footsteps of countries like Ethiopia which run air transport assets – from airports to fuelling operations – under a single company. The Horn of Africa nation uses funds from the more profitable parts to support others, such as national airlines.
Parliament’s approval was described as “great news” by Kenya Airways Chairman, Michael Joseph. “Nationalisation is what is necessary to compete on a level playing field. It is not what we want, but what we need,” he told Reuters, in reference to competitors like Ethiopian Airlines which are state-run and profitable.
Moreover, Koimett dismissed concerns that nationalisation could lead to further mismanagement. “Implementation is really the key thing. Ultimately all these things have to do really with ensuring that we get the right people in the right places,” she said.
On his part, the committee chairman, David Pkosing, claimed that the adoption of the report by the cabinet is a big step towards bringing the required changes to the country’s aviation sector. “This is a new dawn to the country’s aviation sector and if well implemented, it will open new markets to Kenya Airways and thereby increase their income,” Pkosing told the Nation.