DALLAS — As per the decision of the country’s new leader, President William Ruto, flag carrier Kenya Airways (KQ) is set to undergo a major restructuring process.
The carrier will be split into self-managed cargo, passenger, and ground handling units. Under the subdivided scheme, each unit will be responsible for its own daily operations and business practices. The restructuring plan will also include the commencement of a separate charter airline service.
Cabinet Secretary for Transport, Onesmus Kipchumba Murkomen, commended the new charter service and expressed that it represents a viable alternative to sales plans. Murkomen further stated that “We want Kenya Airways majority privately owned.”
Plans to nationalize or sell the airline have also been discontinued.
Kenya Airways Outlook
Since 2014, KQ’s financial position has been unstable, with consecutive losses reported. The impact the COVID-19 pandemic had on the aviation and travel industries led to the Kenyan government issuing a multi-billion-shilling bailout to aid in recovery. However, losses are still being reported. For 2022, KQ recorded a loss of approximately €80m (KES9.8bn) for the first half of the year. It is forecast that this loss will surge by the end of the fourth quarter.
Airline executives listed high fuel prices and hedging losses as the core reasons for the quarter’s results. However, there are debates about the integrity of these claims. Murkomen believes that mismanagement and disruptive practices are the core reasons for the carrier’s state.
With the splitting of KQ services, the plans to strengthen their relationship with South African Airways (SA) are more realistic. The alliance will involve market codeshare flights and the equal exchange of technical and administrative information.
The Kenyan government holds a 48.9% stake in KQ, while banks, private investors, and KLM (KL) hold 38%, 5.3%, and 7.8%, respectively. However, KL has announced plans to sell its shares soon.
The forgone plan to sell the airline was advocated by finance minister nominee Chris Kiptoo, who stated that it was “time to relook at the national carrier and ensure it continues operating without government support. We need to bring in a strategic investor.”
Ultimately, the new government wants to keep the airline privately owned, and as such, debts and bailout cash will not be converted into shares.
Featured image: Kenya Airways photo: Alberto Cucini//Airways