June 11, 2019 / 3:20 PM / 14 days ago

Kenya Airways will back nationalisation to survive: chairman

NAIROBI (Reuters) - Kenya Airways will support the government if it decides that nationalising the airline is critical for its future, Chairman Michael Joseph said on Tuesday.

Kenya Airways planes are seen parked during a pilots strike organised by Kenya Airline Pilots Association (KALPA) at the Jomo Kenyatta International airport near Kenya's capital Nairobi, April 28, 2016. REUTERS/Thomas Mukoya/File Photo

The loss-making carrier, 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 to save the business.

The cabinet backed a plan last year to hand over management of the profitable Jomo Kenyatta International Airport (JKIA) in Nairobi to Kenya Airways in a bid to strengthen its balance sheet and allow it to buy new planes and open new routes.

But parliament’s transport committee, which does not want the airline to run the airport, rejected that plan.

The committee was preparing alternative recommendations to revive the carrier, including potential nationalisation, Joseph told Reuters in an interview.

“They are proposing some kind of aviation holding company where KQ (Kenya Airways) would sit in as 100% owned by the state,” he said.

“If this is in the best interest of the airline in order to put us on a level playing field with competing airlines, and if it allows us to grow the JKIA hub in the best interest of Kenya, then this is what we should do.”

James Macharia, Kenya’s minister of transport, did not respond to requests for comment.

Kenya Airways, which has 41 planes, wants to increase the fleet and open new routes to compete more effectively with carriers like Ethiopian Airlines and Emirates.

Ethiopian Airlines operates more than 100 planes and it has turned Addis Ababa into an aviation and travel hub for the continent over the past decade.

With a pretax loss of 7.59 billion shillings ($74.89 million) last year, Kenya Airways required some state intervention to put it back on a growth footing, Joseph said.

“We don’t want KQ to be nationalised, but if this is the right way to go and in the interest of both KQ and the aviation industry in Kenya, then I would say this is the right way to go,” he said.

($1 = 101.3500 Kenyan shillings)

Editing by Katharine Houreld and Emelia Sithole-Matarise

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