Kenya’s President William Ruto will this week make a pitch to sell a controlling stake in the country’s national carrier Kenya Airways to US investors as a path of returning the struggling airline to profitability.
On Wednesday, Kenya’s Transport Cabinet Secretary Kipchumba Murkomen said the search for strategic partners for Kenya Airways tops the list of President Ruto’s mission to America.
US President Joe Biden is hosting the US-Africa summit this week and will discuss the 2023 elections and democracy in the continent with about 50 African heads of state.
Over 300 American and African companies will meet with heads of different delegations to talk about investments in critical sectors, the White House said on Tuesday.
Kenya will prefer a cash-rich foreign airline as a strategic investor in a plan that could offer the national carrier aviation expertise and cut its reliance on the National Treasury for operational cash.
“We are doing everything possible to ensure that we no longer subsidise the airline and that is why we are looking for a strategic partner,” said Mr Murkomen.
“Even on the President’s trip to the US, one of the topics for discussion is how to get a strategic partner for Kenya Airways,” the CS added.
The United States said it will commit $55 billion to Africa over the next three years, with the White House adding that its plan to invest in the African continent compares favourably to other countries.
Cut state shareholding
On Kenya Airways, a deal would see the state cut its shareholding from 48.9 percent and reduce the ownership of lenders who converted their debt to a 38 percent stake.
Air France-KLM owns a small stake in Kenya Airways and it remains to be seen if the multinational, previously KQ’s anchor shareholder, will sell its remaining 7.76 percent interest.
Mr Murkomen reckons that the state is seeking a fresh equity investor who is expected to inject capital and offer management expertise in the next step of restructuring.
Read: Kenya Airways escalates fight with pilots, seeks to dissolve CBA
The Kenyan national carrier has received multi-billion shilling state bailouts amid delayed recovery from a travel slump following Covid-19 which saw travel curbs put in place to control the spread of the disease.
The fresh restructuring plan comes after the state dropped the favoured long-term solution that was anchored on the nationalisation of the airline.
The plan approved by Kenyan MPs in July 2019 would have led to the delisting of the airline from the Nairobi Securities Exchange.
A law to pave the way for the nationalisation of the airline, which had been proposed before the pandemic, is before Parliament.
Emulate other countries
Kenya wanted to emulate countries such as Ethiopia, which run air transport assets — from airports to fuelling operations —under a single company, using funds from the more profitable parts to support others.
Under the model approved by MPs, Kenya Airways would become one of four subsidiaries in an aviation holding company.
The others would be Jomo Kenyatta International Airport, an aviation college and the Kenya Airports Authority operating all other airports.
KQ recorded a ninth consecutive half-year loss, sinking it Ksh15 billion ($122 million) deeper into a negative equity position.
The airline, which has been surviving on state bailouts since the Covid-19 pandemic, reported an Ksh9.8 billion ($79.7 million) loss in August — a better performance than the Ksh11.48 billion ($93.4 million) loss it recorded in the same period a year earlier.
It booked a further Ksh5.3 billion ($43.1 million) loss on hedged foreign exchange differences, driving its total comprehensive loss to Ksh14.9 billion ($121.2 million).
Read: Kenya Airways cuts loss to Sh15bn on higher revenue
The government 1995 sold a 26 percent stake in KQ to Dutch airline KLM and sold a further 22 per cent stake to local shareholders through an initial public offering at the Nairobi bourse in 1996.
The deal offered KLM seats on the KQ board, the right to appoint certain executives, in particular the CFO, and act as the technical partner for the national carrier.
Source: The East African