National Carrier Kenya Airways has confirmed it is in talks over a potential merger with Kenya Airports Authority, the autonomous body charged with the responsibility of providing and managing all airports in the country.
In a statement sent to market participants through the Nairobi Securities Exchange, the airline said negotiations have already been approved by the cabinet and that the deal is part of its recovery efforts all while making Nairobi as a regional transportation hub.
If the proposal goes through, Kenya Airways will run Jomo Kenyatta International Airport (JKIA) for a minimum of 30 years.
The partnership would also enable them improve operations and elevate the status of JKIA as a regional hub placing the carrier on a near equal footing with airlines such as Emirates and Ethiopian airways which are state owned ,controlled and are managed for the benefit of the airline.
Currently JKIA is run by KAA, and when push comes to shove JKIA will be owned and managed by a holding company that will in turn owned by Kenya Airways under a 30 year concession agreement.
According to Reuters, Kenya Airports Authority mints an average revenue of Sh 13.5 billion from the Jomo Kenyatta airport every year, including Sh 3 billion from non-aviation services like leasing of space to restaurants.
According to various media reports, the National Treasury and the Ministry of Transport, Infrastructure and Housing last month tabled a Cabinet memorandum seeking approval to open negotiations between Kenya Airways and KAA on the merger arrangement.
Kenya Airways also proposed to pay the airport authority concession fees and to run other profitable services at the airport including catering, fuel distribution, cargo and ground services facilities and maintenance. The concession fees have not yet been agreed upon.
Kenya Airways, which is owned 48.9 percent by the government and 7.8 percent by Air France/KLM, had $2 billion of debt restructured last year. A consortium of local banks through a special purpose vehicle – KQ Lenders Company 2017 Ltd – now own 38.1 per cent shares of the airline after having the debt owed to them by KQ converted to equity.
