September 17, 2019 / 9:59 AM / a month ago

Kenya Airways chairman calls for professional board after nationalization

NAIROBI (Reuters) - Kenya Airways (KQNA.NR) must avoid picking a board packed with politically-connected individuals after it is renationalized in order to ensure future success, its chairman said on Tuesday.

FILE PHOTO: A Kenya Airways staff member is seen at the rear door of a Boeing Dreamliner 787-8 inside a hangar at their headquarters in Nairobi, Kenya June 27, 2018. REUTERS/Thomas Mukoya/File Photo

The loss-making airline, which is 48.9% government-owned and 7.8% held by Air France-KLM (AIRF.PA), was privatized 23 years ago but sank into debt and losses in 2014. Lawmakers voted to re-nationalize it in July.

Chairman Michael Joseph said the requirement for professionals to be put in charge of the airline is being built into draft laws that will guide the renationalization.

“It must be run in a commercial way,” he told reporters on the sidelines of an aviation meeting.

“We do not want to create a situation that we had before, where you nationalize the airline and all it becomes is a department of government. The board of directors is loaded by friends of politicians.”

A failed expansion drive and a slump in air travel forced the airline to restructure $2 billion of debt in 2017. But Kenya Airways still needed cash for fleet and route expansion amid growing competition from Ethiopian and Emirates.

Kenya wants to emulate countries like Ethiopia, which runs air transport assets - from airports to fuelling operations - under a single company, using funds from the more profitable parts to support others.

Under the model approved by lawmakers, Kenya Airways will become one of four subsidiaries in an Aviation Holding Company.

The others will be Jomo Kenyatta International Airport (JKIA), the country’s biggest airport, an aviation college and Kenya Airports Authority, which will operate all the nation’s other airports.

“We want to make sure that if you create a nationalized airline that it will operate as a semi-autonomous airline,” Joseph said.

Competition among regional carriers rose at the end of last month when Uganda Airlines resumed flights after almost two decades.

Joseph said such developments left Kenya without any choice but to renationalize its airline, in order to cut costs and survive in the crowded Africa aviation market, where carriers have the weakest finances and emptiest planes of any region in the world.

“If we don’t do this we have no airline,” he said.

Reporting by Omar Mohammed; Writing by Duncan Miriri,; Editing by Ed Osmond

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