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Lawmakers Back Plan to Nationalize Kenya Airways

FILE - Kenya Airways planes are seen parked at the Jomo Kenyatta International airport near Kenya's capital Nairobi, April 28, 2016.

Kenya's parliament voted on Tuesday to nationalize the country's main airline Kenya Airways to save it from mounting debts.

The loss-making airline, which is 48.9% government-owned and 7.8% held by Air France-KLM, has been struggling to return to profitability and growth.

A failed expansion drive and a slump in air travel forced it to restructure $2 billion of debt in 2017. The airline later proposed taking over the running of Nairobi's main airport to boost its revenue.

Parliament's transport committee, however, rejected that plan, recommending instead the nationalization of the airline in a report debated by the national assembly on June 18.

In a voice vote taken on Tuesday afternoon, the majority of lawmakers in the chamber voted to accept the report.

Kenya Airways Chairman Michael Joseph told Reuters the vote was "great news."

"Nationalization is what is necessary to compete on a level playing field. It is not what we want, but what we need," he said, referring to competitors such as Ethiopian Airlines which are state-run and profitable.

Air France-KLM could not immediately be reached for comment.

The government will now draw up an implementation plan, with clear time lines, said Esther Koimett, the principal secretary at the ministry of transport.

"Parliament is our boss ... we will obviously take the recommendations of parliament," she told Reuters.

Kenya is seeking to emulate countries like Ethiopia which run air transport assets from airports to fueling operations under a single company, using funds from the more profitable parts to support others, such as national airlines.

"The government is keen to take a consolidated view of aviation assets of the country in order to make sure they work in a coherent and efficient way to support the (Nairobi aviation) hub," Koimett said.

The committee's report proposes that Kenya set up an aviation holding company with four subsidiaries, one of which would run Kenya Airways. Another arm of the holding company would operate Nairobi's main international airport.

The committee's report also recommended the holding company be given tax concessions for a period to be determined and that it be exempted from paying excise duty on all goods, including jet fuel.

Koimett dismissed concerns that nationalization could lead to further mismanagement. Kenya's state-owned enterprises sector is riddled with corporate corpses and near failures caused by theft and poor management over the decades.

"Implementation is really the key thing ... Ultimately all these things have to do really with ensuring that we get the right people in the right places," she said.

($1 = 103.7000 Kenyan shillings)