Kenya Airways board lukewarm on nationalisation

The Board of Kenya Airways (KQ) has emerged half-hearted in its receipt of the government’s decision to nationalise the carrier.

KQ which saw its quest to establish a joint partnership with the Kenya Airports Authority (KAA) on the running of the Jomo Kenyatta International Airport (JKIA) thwarted, earlier in 2019, has since embraced the offer but for an observed impassiveness.

“It’s not what we wanted and not what we would like to be a nationalised entity,” Kenya Airways Chairman Michael Joseph told a news conference on Tuesday.

“None of these people working here want to be in a State Corporation for all the different connotations, but, this is what we need to do in order to be competitive and bring the airline to where it needs to be”.

The reluctance to warm up to the deal is on one hand a propagation of real fears emanating from the likelihood of ceding control to State bureaucracy even as the pronouncement on nationalisation remains timely in breaking KQ’s financial rot.

According to Kenya Airways outgoing Chief Executive Officer Sebastian Mikosz, the management of costs through an integrated operational model remains pivotal in turning around fortunes for the carrier in the face of increased competition from the region and the globe at large.

“As you may know, we have not had external cash injections since 2017’s debt restructuring. We are always in a trap of the want to expand against the risks of depreciation from a new capital injection which would dig our losses further,” he said.

Having dropped the joint venture bid which would have seen KQ run JKIA alongside KAA for a fee in a 30 year tenured contract, the National Assembly; Transport and Public Works Committee would in the end recommend the creation of a State owned, four-way aviation holding company.

Further, the committee recommended tax breaks including exemptions to remitting import declaration fees and excise duty on parts and fuel over a specified period.

Saving Grace?

The anxiety on nationalization extends beyond the realms of KQ with industry stakeholders too, reflective of significant blurred lines in the running to the carrier’s nationalization.

Financially, the anchoring on KQ on nationalization is seen as a mere move to save the airline from total collapse even as the State faces acute resource pressures to buy back an estimated 53 percent stake in the company under greater fiscal demands.

“Nationalization is not a value saving answer to KQ as it only saves the airline from collapse. The move is not in favor of shareholders keen on long-term investing but makes for a benefit to owned parties,” Zamara Consultancy Project Head Reginald Kadzutu told Citizen Digital in an earlier interview.

The nationalization plan is centrally anchored on relieving KQ from it’s mounting operational costs which are despite significant trends of gains in revenue.

The company which reported an expanded loss of Ksh.8.6 billion during the first six-months of 2019 saw its operating costs mount to Ksh.67.1 billion from Ksh.56.2 billion in a corresponding 2018 period, wiping out profits made from additional revenues.

While nationalization makes for a plausible case to save KQ from the canines of its operational imbalances, transport sector allied economist David Nashon warns of jumping the gun without the conduct of an all-rounded study highlighting on JKIA’s strategic importance to Nairobi’s regional hub dream.

“Any move towards nationalization must be backed by an informed study. On one hand, we understand the prevailing challenges in Kenya’s aviation sector but what we are seeing so far in the pursuit of an aviation holding company is a knee-jack reaction,” he said.