Vote puts government’s stake in Kenya Airways in doubt

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According to the reports from Nairobi, Kenyan parliament has slashed the budget estimate for the government retaining its significant 23% stake in Kenya Airways (KQ), passing only 2.5 billion of 5.5 b

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According to the reports from Nairobi, Kenyan parliament has slashed the budget estimate for the government retaining its significant 23% stake in Kenya Airways (KQ), passing only 2.5 billion of 5.5 billion Kenya Shillings requested. This move by the parliament may force the government to either not take up its full share, so other investors would be able to step in and acquire a significant stake in KQ, or make another attempt to convince the parliament to allocate the entire amount needed.

While the Kenyan government has allowed their stakes in other corporations and co-owned companies to slip to allow greater private sector investments, it does not appear to be the case with KQ, where the country has a strategic interest and is keen to retain influence on board level to fully participate in the affairs of ‘The Pride of Africa’.

It has been suggested that special arrangements be made for government to hold on to their share in the company by stretching the payments but it is not clear how other shareholders and potential investors from the private sector may view such extraordinary measures and whether it would pass the legal scrutiny at all.

KLM / Air France, the other major shareholder, has already signaled that they will also take up their share rights in full, to retain their 265 stake.

Kenya Airways has opted for this method of raising cash in order to finance new aircraft purchases and to reduce its debt exposure, which could otherwise make for a rather uncomfortable reading in finance meetings of the airline, when payments for the new aircraft become due.

KQ has made it clear through statements in recent months that it intends to become the number one airline on the continent, connecting all African capitals and key commercial centers from their hub in Nairobi, and is also looking at expansion on intercontinental routes to capture more traffic destined for Kenya, the region and the rest of Africa.

An order and option package for 26 additional aircraft, signed with Brazil’s Embraer last week, will literally double the fleet of Kenya Airways and facilitate an aggressive rollout of new destinations in Africa, greater presence in the East African region and, on the domestic market the eventual introduction of a shuttle to Kisumu, similar to the shuttle to Mombasa.

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