Kenya Airways seeks to run Nairobi’s Jomo Kenyatta International Airport

Kenya Airways is hoping to boost its chances of profitability and survival as it seeks approval to run Kenya’s largest and one of Africa’s busiest airports. Michael Joseph, Chairman of Kenya Airways, said the airline had proposed forming a special-purpose vehicle with state-run Kenya Airports Authority (KAA) that would allow the airline to run Nairobi’s ‘Jomo Kenyatta International Airport’ (JKIA) for a minimum of 30 years. The company is close to winning the approval before the end of 2018. Jomo Kenyatta Airport is owned and run by the KAA. “All our competitors are state-owned, state-controlled, state-subsidized and managed for the benefit of their airline. We are the odd one out,” the Chairman, who is the former CEO of Safaricom, told the press. Granting the proposal to run Jomo Kenyatta Airport is vital for the national flag carrier’s survival. The company had been struggling to get out of losses since 2013 after costly purchases of aircraft coincided with a slump in tourism and business travel to Kenya as a result of attacks by Somalia-based Islamist militants. Operational results for fiscal years 2015 and 2016 showed substantial losses. The ailing state carrier underwent a major debt restructuring at the end of 2017. The company’s stakeholders agreed to convert close to half a billion U.S. dollars in debt into equity. The new structure increased the share of the Government of Kenya from 29.8% to 48.9%, making it the largest shareholder and KQ Lenders Company’s (a special- purpose vehicle owned by a consortium of Kenyan banks) share became 38.1%, while Air France/KLM stake was reduced to 7.8%. In a bid to improve the fortunes of the company, the proposal, which still needs the approval of Parliament, will allow the airline to run profitable services at the airport, including catering, fuel distribution, cargo and ground services facilities and maintenance. Kenya Airways would also have the ability to determine take-off and landing slots, which would give it an edge over other airlines using the airport. KAA said it gets revenue of KES 13.5 billion (USD 133.93 million) from the Jomo Kenyatta Airport per year, including KES 3 billion from non-aviation services like leasing of space to restaurants. Additionally, the airline has planned new routes in an attempt to drive growth. The carrier plans to add up to 20 new destinations in Africa, Europe and Asia in the next five years. The route-network expansion and proposal to run the airport will help sub-Saharan Africa’s third-biggest carrier return to profit. “We are looking to at least one European route and one Asian route on top of the African network,” Chief Executive Officer Sebastian Mikosz said in March 2018. “We might announce maybe two, three new routes to be operated in 2019.” Under the new arrangement, JKIA is to be owned and managed by a private holding company, which is to be 100% owned by Kenya Airways. The plan is set to run for 30 years. As airport operator, Kenya Airways would have control of the allocation of take-off and landing slots, although Joseph denied this was the reason for the move. The airline faces stiff opposition from Ethiopia Airlines which has been able to expand rapidly over the past decade, recording profits in the process. The airline can, however, learn from Ethiopia’s management of its own state carrier. Even though 100% owned by the Ethiopian government, the national carrier has remained the most profitable airline on the continent. “2018 is a year of consolidation, of finalizing all the cost-reduction measures we have put in place, making sure we have the systems in place in terms of a revenue point of view,” Michael Joseph said while revealing profitability plans earlier in 2018. “If everything goes according to plan, I think the path we are on is a good one.” #1079.5