President William Ruto will pitch this week to sell a controlling stake in national carrier Kenya Airways to US investors as a way to return the struggling airline to profitability.
On Wednesday Transport Cabinet Secretary Kipchumba Murkomen said the search for strategic partners for Kenya Airways is at the top of the list of Dr 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 on the continent with around 50 African Heads of State.
More than 300 American and African companies will meet with the heads of various delegations to talk about investments in critical sectors, the White House said on Tuesday.
Kenya has favored a cash-rich foreign airline as a strategic investor in a plan that could offer the national carrier aviation expertise and reduce its dependence on the Treasury for operating cash.
“We are doing everything possible to ensure that we no longer subsidize 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 to be discussed is how to find a strategic partner for Kenya Airways,” the CS said.
The United States said it will pledge $55 billion to Africa over the next three years, and the White House said its plan to invest on the African continent compares favorably with other countries.
On Kenya Airways, the deal would reduce the State’s shareholding from 48.9 percent and reduce the ownership of lenders who changed their debt to 38 percent.
Air France-KLM has a small stake in Kenya Airways and it remains to be seen whether the multinational, which was previously KQ’s anchor shareholder, will sell its remaining 7.76 percent interest.
Mr. Murkomen believes that the State is looking for a fresh equity investor who is expected to inject capital and provide management expertise in the next phase of the restructuring.
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The national carrier has received multi-billion State bailouts amid a delayed recovery from a travel slump following Covid-19 when travel curbs were put in place to control the spread of the disease.
The restructuring plan comes fresh after the State ended its preferred long-term solution anchored on the nationalization of the airline.
The plan approved by MPs in July 2019 would see the airline divested from the Nairobi Securities Exchange (NSE).
A law is before Parliament to pave the way for the nationalization of the airline, which was proposed before the pandemic.
Kenya wanted to emulate countries such as Ethiopia, which run aviation assets – from airports to fueling operations – under one company, using funds from the most profitable segments to support others.
Under the model approved by the MPs, Kenya Airways would be one of four subsidiaries in an aviation holding company.
The others are Jomo Kenyatta International Airport, an aviation college and the Kenya Airports Authority which operates all other airports.
KQ recorded its ninth consecutive half-year loss, plunging Sh15 billion deeper into a negative equity position.
The airline, which is surviving on State bailouts from the Covid-19 pandemic, reported a Sh9.8 billion loss in August – a better performance than the Sh11.48 billion loss it recorded in the same period a year earlier.
It booked an additional loss of Sh5.3 billion on hedged foreign exchange differences, increasing its total comprehensive loss to Sh14.9 billion.
READ: Kenya Airways cuts loss to Sh15bn on higher revenue
The government in 1995 sold a 26 percent stake in KQ to the Dutch airline KLM and sold a further 22 percent stake to local shareholders through an initial public offering at the Nairobi bourse in 1996.
The agreement offered KLM seats on the KQ board, the right to appoint certain executives, especially the CFO, and act as a technical partner for the national carrier.
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