NATIONALISATION FRAMEWORK TO GO BEFORE PARLIAMENT IN NAIROBI
(Posted 27th May 2020)
The Kenyan government has reportedly denied Kenya Airways a further cash boost of 7 billion Kenya Shillings after the airline has used up a 5 billion Kenya Shillings loan given to them in February this year.
The Treasury reportedly refused a further cash injection, suggesting that they rather wait for the framework of the proposed nationalisation of the airline to be presented to parliament and debated there.
It was learned overnight that the cabinet in Nairobi has sanctioned a draft proposal to be sent to parliament, hoping that by August this year a solution can be found and a decision reached.
Although the airline has of late started to operate cargo flights with their otherwise grounded wide body fleet, has the decision last year to shed their long haul cargo aircraft – which was on lease – come back to haunt them as competing carriers, especially Ethiopian Airlines, operate a large freighter fleet and have become the international choice for Africa to distribute medical supplies with Bole International Airport in Addis Ababa the designated African platform for distribution.
Kenya Airways also owns two converted Boeing B737-300 freighters, one of which however is presently undergoing major maintenance. This aircraft type only has a medium range and can only distribute and collect cargo within the wider Eastern African region.
The lack of added fund injection is likely to cause a cash crunch for the airline which, like South African Airways, is at the brink of financial collapse.
The Kenya government currently owns just under 49 percent of the company shares and seeks to eventually buy out the remaining 51 percent from other shareholders. A major shareholding is owned by a number of Kenya’s banks which had given loans to the airline and then had to agree on a debt for equity swap two years ago. They are thought to be likely to insist on significantly higher share prices to be offered by the government compared to the present trading value on the NSE.
When flights in the region and across Africa resume, is Kenya Airways also faced with added competition on some of their previously most profitable routes, when besides them other regional carriers like RwandAir – itself assured of some 150+ million US Dollars in government support over the next 12 months – but also Air Tanzania and Uganda Airlines take to the skies again.
