KQ, airports authority yet to agree on partnership with authority

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Kenya Airways plane
Kenya Airways plane. FILE PHOTO | NMG 

A decision on the nature of a proposed partnership between Kenya Airways (KQ) #ticker:KQ and the Kenya Airports Authority (KAA) is yet to be made seven months since the cabinet backed the move.

The Cabinet in June approved proposed collaboration between the troubled national carrier and KAA to boost the airline’s recovery and cement Nairobi’s status as a regional transport hub.

The main objective of the envisaged partnership is to reposition KQ in a similar fashion as its main rivals, including Emirates, Ethiopian Airways, Qatar Airways and Rwanda Air, which have relied on government backing to expand their reach.

“We are not into the details yet because it’s a very complicated issue. We are yet to decide whether it’s a concession, merger or something else but we are taking competition into consideration,” KAA managing director Jonny Andersen told the National Assembly Transport committee yesterday.

KQ has over the years pushed for more preferential treatment at its Nairobi hub to help it weather tough competition from rival airlines.

The joint venture would place KQ on a near equal footing with major competitors flying in and out of Nairobi that get preferential treatment at their hubs and even have an influence in operations of their home airports.

“We are going to be looking at the technical, legal and financial part of the plan and give advice based on these,” said Mr Andersen.

While JKIA is fully owned by the government through KAA, KQ’s ownership includes private investors whose interests will be addressed through the appointment of transaction advisers and the refinement of the project details.

The government’s stake in KQ stands at 48.9 per cent, followed by 10 local banks (38.1 per cent). The rest of the KQ shares are held by local and foreign institutional and individual investors. In contrast, KQ’s rivals such as the Emirates, Ethiopian Airways, Qatar Airways and RwandAir are fully owned by their respective governments in what makes it easy to build synergies between the carriers and their home airports.

The proposed project is expected to help KQ add a minimum of 23 aircraft and more than 20 new international destinations over the next five years. This, in turn, is projected to lift annual passenger numbers to 6.9 million from the current 4.1 million.

It is envisaged that the PPP will have the KAA as the contracting authority and KQ as the private party.

The collaboration, which will run for a minimum of 30 years, will be held by a special purpose vehicle (SPV) that will be fully owned by the national carrier.

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By Kenyan Digest

The Kenyan Digest Team