Kenya Aviation Corporation to take over Kenya Airways

The aviation sector in Kenya is undergoing a significant transformation as the government moves to take full control of Kenya Airways through the National Aviation Management Bill 2020. The bill, which is set to be debated in Parliament, aims to guide the sale of Kenya Airways and delist it from the Nairobi Securities Exchange by October. Economic Analyst Reginald Kadzutu provided insights into the rationale behind the government buyout and the potential implications for the national carrier. Kadzutu highlighted the primary reason driving the government's decision to take over Kenya Airways - the continuous need for funding. As the largest shareholder in the airline, the government has been faced with frequent cash calls from the struggling carrier, leading to the realization that operating as a private entity may not be sustainable for Kenya Airways. By bringing the airline under full government control, there is hope that the government can inject resources and expertise to turn it around. One of the key discussions surrounding the buyout is the pricing of shares owned by current stakeholders. While the government owns a significant 48.9% stake in Kenya Airways, KLM, which holds 7.8% of the shares, is also a major player in the negotiations. Kadzutu pointed out that pricing discussions have not yet commenced and will only begin once the bill is passed. The government's focus will be on convincing KLM, banks, and staff shareholders to agree to a price that addresses their prior investments and debts. With past bailouts from the government, questions arise about whether the Kenyan government expects to recoup the funds it injects into the national carrier. Kadzutu expressed skepticism regarding the government's ability to recover the money, suggesting that nationalizing Kenya Airways might result in a significant write-off of debts. He cautioned against the current approach outlined in the bill, which establishes multiple bureaucratic entities overseeing the airline, potentially hindering operational efficiency. While the government aims to nationalize Kenya Airways to bolster its financial position, Kadzutu emphasized that the airline has shown revenue growth in recent years. Despite challenges such as rising fuel and operational costs, Kenya Airways has experienced positive trends in passenger and cargo volumes. Kadzutu advocated for a strategic approach to cost management, focusing on direct expenses like aircraft maintenance and fuel costs to enhance profitability. When asked about potential alternatives for Kenya Airways if the government does not proceed with the buyout, Kadzutu underscored the importance of effective cost management and board oversight. By appointing skilled professionals to key committees and addressing issues of corruption and inefficiency, Kenya Airways could improve its competitiveness within the African aviation market. As debates on the National Aviation Management Bill 2020 unfold in Parliament, the future of Kenya Airways hangs in the balance. The government's decision to take full control of the national carrier presents both opportunities and challenges, as stakeholders navigate pricing agreements and operational strategies to secure the airline's viability in the long run.