Kenya Airways’ Joseph states merging state aviation assets will help in getting funds

November 02, 2019: The proposed nationalisation of Kenya Airways and its inclusion in a state-owned aviation holding company will enhance its ability to borrow funds for expansion. The new entity will comprise Kenya Airways, Nairobi’s Jomo Kenyatta International Airport and the Kenya Airports Authority, said Kenya Airways’ chairman Michael Joseph in an interview with Bloomberg Quint. 

The combination of the businesses is expected to create a stronger balance sheet than when they operated individually, with assets such as KAA’s 1 trillion shillings ($9.7 billion) of land included. “The way it’s designed is to have a strong board that will have the authority and the mandate to leverage the balance sheets to expand the aviation business in Kenya,” he said.

Kenya is looking to strengthen its aviation sector to counter mounting competition from neighbouring Ethiopia, which is expanding its main airport and operates Africa’s only consistently profitable carrier in Ethiopian Airlines Group. The Horn of Africa country has reaped the benefits of turning Addis Ababa into a hub for travellers from the continent to the Middle East and Asia. 

Meanwhile Rwanda, to the southwest, is building an $818 million hub with the support of Qatar Airways. 

Infrastructure investment initiatives by fellow East African governments is a “worrying situation” for Kenya, he added that the region’s biggest economy could be left behind. “We want other airlines to fly here so we can have more revenues for the airport,” he said. 

“The more we can expand the airport, the more we can expand the balance sheet, the more we can expand Kenya Airways.”

The loss-making airline has presented proposals on nationalisation to the parliament’s transport sub-committee that will then make recommendations to the cabinet. One issue to address is how to buy out non-government investors, including Air France-KLM. The state became the largest shareholder following a bailout in 2017.

One option is to replace Kenya Airways shares with a government bond, Joseph said, adding that the process is ongoing.

“My hope is that in the next six to nine months, we will have this done,” the chairman said.

The company is in the final stages of selecting a new chief executive to replace Sebastian Mikosz, who resigned in May, and an announcement will be made before the end of the year, Joseph said.