By Bella Genga, Bloomberg – Feb 26, 2019 12:05 pm
Kenya may consider taking full ownership of its national carrier to effectively ward off competition from other state-owned airlines on the continent and from the Gulf, according to Transport Principal Secretary Esther Koimett.
The East African state owns 48.9 percent of Kenya Airways Plc after it converted debt into equity in 2017. The agreement diluted major shareholder Air France-KLM’s stake to 7.8 percent, and brought in a consortium of banks under the name KQ Lenders 2017 Ltd., with 38.1 percent.
“But that does not mean that it needs to remain this way,” Koimett told lawmakers in the capital, Nairobi. “We can create a path that leads it to a 100 percent ownership by the government.”
The main hurdle to that plan is outstanding loans, for which the carrier renegotiated repayment schedules, she told a parliamentary committee that’s scrutinizing a proposed joint venture between the airline and the state-owned airport operator to run the nation’s biggest airport.
While the policy is welcome, the proposal needs some fine-tuning, the Kenya Airports Authority Managing Director Jonny Andersen told the lawmakers. The joint venture could help reverse loss of market share to competitors such as Ethiopian Airlines Group, he said. KAA appointed a transaction adviser last year to examine the proposal.
©2019 Bloomberg L.P.
The Bottom Line:
Kenya might soon turn its airline into a publicly-owned, government operation. Although the airline’s current debt is a debilitating factor towards this end, the potential of this new change still remains. If the government does take ownership, it will provide an interesting case study for the rest of the world to observe: how business and leisure travel responds to a government-owned national airline.
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