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Kenya Airways minority shareholders oppose proposed government takeover

KQ was government owned until 1995 then became private after accumulating debts due to poor management

In Summary

•KQ was government owned until 1995 when it become the first state owned airline to successfully become private after accumulating debts due to poor management

Kenya Airways chief executive offi cer Sebastian Mikosz with chairman Michael Joseph during an introductory roundtable media briefi ng in Nairobi last week. /ENOS TECHE
Kenya Airways chief executive offi cer Sebastian Mikosz with chairman Michael Joseph during an introductory roundtable media briefi ng in Nairobi last week. /ENOS TECHE

Minority shareholders of listed airline, Kenya Airways have opposed a nationalisation proposal, saying a similar initiative in 1990s was unfruitful.

Their made thei stand known at the airline’s 43rd annual general meeting in Nairobi yesterday made their stand on the subject when one of them challenged the management to state its position on the planned government takeover.

‘’Kindly tell us if what we are hearing about nationalisation of Kenya Airways is true. We have been patiently waiting for the promised turnaround of this firm and subsequent benefits….Is nationalisation a solution?,’’ asked Daniel Kimotho.

His question drew applause from shareholders who said they would  rather wait for their first dividend in many years that abandon the airline.

Another shareholder wondered what magic nationalisation would do to turn around the airline's fortunes .

"The reason why this airline was privatised in 1995 is because it was collapsing under state watch. What happens to our years of investment and patience if the state succeed in taking over? Please tell us,’’ he said.

KQ as the airline is known internationally was government owned until 1995 when it become the first state owned airline to successfully become private after accumulating debts due to poor management.

In 1986, the government published a sessional paper outlining the country's need for economic development and growth where stressed its opinion that the airline would be better off privately owned, thus resulting in the first privatisation attempt.

In 1994, the International Finance Corporation (IFC)was appointed to provide assistance in the privatisation process, which effectively began in 1995.

The 1995 privatisation and debt restructuring saw the Dutch airline KLM acquire 26 per cent stake in KQ through a master corporation agreement while the government kept a 23 per cent stake in the company.

 

The public was offered 51 per cent stake a move that saw the airline start trading on the Nairobi Securities Exchange (NSE), in March 1996.

In 2017, the firm restructured its Sh75 billion debt to stay afloat, bringing on board new shareholders. This saw minority shares squeezed. 

Currently the airline is 48.9 per cent owned by the government of Kenya, 38.1 per cent owned by KQ Lenders Company (which includes a variety of banks), and 7.8 per cent owned by Air France KLM, with the remaining shares privately owned.

Last month, the Parliamentary Transport Committee tabled report on possible strategies to revive the loss making national carrier, with government buyout considered the best option.

The committee chaired by Pokot South MP David Pkosing proposed nationalisation process and the creation of five subsidiaries within a holding company to run the airline, JKIA and provide related services in the recommendation modeled on the aviation management structures in countries such as Ethiopia and Egypt.

This was among the eight options that had been explored by the stakeholders. The Parliament is expected to vote on recommendations in coming days.

Kenya Airways had presented a proposal to manage the Jomo Kenyatta International Airport (JKIA) as a way of pushing up its revenues and wrestle growing competition from regional peers.

Yesterday, KQ chairman Michael Joseph told shareholders that the airline has given hope on the plan, leaving the task to Legislators.

‘’Although the management strategy presented to the Kenya Airport Authority (KAA) was feasible, it was politicised leading to its dead end,’’ Joseph said.

The chairman declined to comment on the proposed nationalisation, saying that he cannot speak for the Parliament.

He however assured shareholders that their interests will be protected in case nationalisation happens.

''It is not our wish to nationalise the airline. If we go that way, it will be in the best interest of Kenyans. I promise you it will be different,’’ Joseph said.

Shareholders have re-elected him as the chairman for next three years. They also handed Treasury PS Kamau Thugge three years more to serve on the board.

They unanimously elected Kenya Pipeline chairman John Ngumi to the board to serve for three years.