Yesterday, Parliament voted for the nationalization of Kenya Airways, Kenya’s national airline. This is after the legislators rejected the airline’s Private Initiated Investment Proposal dated 18 June 2019 to take over Jomo Kenyatta International Airport as part of a plan to improve its revenue.
The nationalization will entail the formation of an Aviation Holding Company to run the country’s aviation sector. The holding company will consist of four subsidiaries including the Kenya Airports Authority (KAA), Kenya Airways (KQ), Jomo Kenyatta International Airport (JKIA), and a centralized aviation college. Still, major ownership of the airline will remain with the government, with the state owning 48.9% of the company. Other owners include Air France KLM with 7.8% and local banks who own 38.1% of the Airline’s stake.
Parliament’s consent to nationalize KQ is anticipated to make the airline more competitive, allowing it to challenge players like Ethiopian Airlines, a state-owned airline, among other competitors. Additionally, the move will save the airline from its debt quicksand, cut its stemming losses, and provide financial muscle to acquire more fleets.
Nationalization of the airlines serves more than just KQ. Under the new holding company, the airline is anticipated to pay its 80,000 shareholders who own the company stock at the Nairobi Stock Exchange. Funds from the profitable subsidiaries will allow the less profitable JKIA to increase its capacity and expand beyond its current 53 destinations, to match competing airports like Ethiopia’s Bole International airport which currently connects 153 destinations.
According to David Pkosing, the Transport Committee Chairperson, the implementation of the nationalization plan, restructuring the Kenyan aviation sector among other recommendations of the report will take 2 years.
However, the government might have to make compromises to allow the Holding company to effectively run its subsidiaries. Among other requests, the committee is requesting the treasury to grant tax concessions to Aviation Holding Company, including exemption of excise duty on jet fuel.
