Standard Business

Kenya Airways in limbo amid delay of nationalisation Bill

Survival is now dependent on shareholder loans. [Courtesy]

The fate of national carrier Kenya Airways (KQ) hangs in the balance with the process to nationalise it continuing to drag while demand for travel is at an all-time low owing to the Covid-19 pandemic.

The uncertainty adds to the gloom that has persisted at the airline in the last few years as it sinks deeper into losses.

Nationalisation was expected to give KQ renewed growth impetus but Parliament has delayed in passing the National Aviation Management Bill, 2020, which is meant to revert the airline’s ownership to government. 

This has left the carrier somewhat in suspense even as business continues to be uncertain, with the management saying the earliest they expect growth is 2024.

Survival is now dependent on shareholder loans as the airline’s revenues are unable to finance daily operations.

“As far as we are aware, the aviation Bill is in the parliamentary process… it was delayed last year. That process is out of our control,” KQ Chairman Michael Joseph said in a briefing after the company’s annual general meeting yesterday.

“When it comes back, other processes will start. In the meantime, we continue to see other alternative ways we can ensure the security and future of KQ.” 

The government has in the current financial year advanced Sh10 billion to KQ in shareholder loans and is expected to increase this amount before the close of the year on June 30.

Mr Joseph added that the outlook for the carrier, and generally the airline industry, is not rosy. He noted that other than Covid-19, which grounded nearly all its planes for a few months last year, KQ has to grapple with next year’s general elections, which usually slow down travel in the country.

“If you look at all the projections, 2024 is probably the earliest we can see an upturn and a return to some normalcy in the aviation business. It will take a long time to get people to start flying, all the restrictions have to be lifted,” he said.

“Next year we have elections in Kenya and there is always a downturn in terms of revenue for us… so 2024…25 is the earliest we will start to see some growth.”

At the AGM, Chief Executive Allan Kilavuka said the carrier’s efforts to survive had resulted in salary cuts for all staff while some employees were laid off.

This, he said, helped the company cut staff costs by 30 per cent. He added that the airline was adopting performance-based pay, especially for new recruits.

“There were different actions that were aimed at reducing the cost and not necessarily numbers of staff. These varied from voluntary exit, retirements and natural attrition to reduction in payouts,” Mr Kilavuka said.

“That reduced the number of staff by about 24 per cent and the cost by over 30 per cent.”

“Is this over? There are so many uncertainties… what we want to do is respond with agility to any situation that arises,” he added.

At the AGM, the carrier’s directors Martin Oduor-Otieno and Carol Musyoka retired.

They were appointed to the board in 2017 following nominations by the KQ Lenders Company 2017, which has a 38.1 per cent stake in the carrier.

The company holds the shares on behalf of a consortium of local banks whose loans to the airline were converted to equity in a restructuring.

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