As a solution to return the national carrier, Kenya Airways to profitability, Kenya’s National Treasury wants a cash-rich foreign airline to buy a controlling take in the Airline.
This was the word from Principal Secretary nominee of The National Treasury, Chris Kiptoo who appeared before the Departmental Committee on Finance and Planning at County Hall in Nairobi on November 14, 2022.
Lawmakers were informed the equity investor would be expected to inject capital and offer management expertise in the next step of restructuring the flag carrier. The state would reduce its shareholding from 48.9% and cut the ownership of lenders who would convert their debt to hold 38%. Air France-KLM, which owns 7.76% of Kenya Airways were not mentioned.
Kiptoo said Kenya would prefer a foreign airline as a strategic investor in a plan that could offer the national carrier aviation expertise and cut its reliance on the state for operational cash. “It is time to relook at the national carrier and ensure it continues operating without government support. We need to bring in a strategic investor,” he said.
It was also said that Kenya Airways operated profitably when supported by KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) and that the government must return to this model to return the airline to profitability.
There was no mention of the planned pan-African alliance between Kenya Airways and South African Airways (SA, Johannesburg O.R. Tambo), which have set themselves the target of establishing the structure of a new group holding company by the end of 2023.
Roads, Transport and Public Works Cabinet Secretary Kipchumba Murkomen alluded to a plan to split Kenya Airways into various subsidiaries along its primary business divisions of passenger, cargo, and ground handling services, all operating at a loss.
Murkomen told Parliament the state would not convert its loans into shares. “We do not want to cross the 50% shareholding because we want Kenya Airways to remain a privately owned company,” he said.
Kenya Airways has been surviving on state bailouts since the pandemic, reported a KES9.8 billion shilling (USD80.3 million) loss in August 2022, an improvement on the KES11.48 billion (USD94.1 million) loss in the same period in 2021. It reported a further KES5.3 billion (USD43.4 million) loss on hedged foreign exchange differences, driving its total loss to KES14.9 billion (USD122.2 million). Passenger services have returned an operating loss of KES4.5 billion (USD36.9 million), cargo KES1.74 billion (USD14.2 million), and ground handling KES166 million (USD1.3 million).
The airline is currently being restructured with state loans that will have to be repaid. This plan came after the government dropped a plan approved in 2019 to fully re-nationalise the airline. State loans include KES20 billion (USD173.9 million) in May 2022; KES11.3 billion (about USD95 million) in the half-year ending June 30, 2022, following loans of KES11 billion (USD95.2 million) in 2020, and KES14 billion (USD121.1 million) in 2021.