The CEO of Kenya Airways, Sebastian Mikosz, has told Reuters that the government needs to get the airline nationalization process done quickly if it’s to have the desired effect. The decision to re-nationalize the carrier was made in July, but Mikosz is urging the government not to drag its heels if it is to make the most of the opportunity renationalization presents.
Nationalization needs to get a move on
The CEO of Kenya Airways has told the government to move fast and nationalize the airline. He said that too many state owned competitors are having money poured into them by their governments, and its making it impossible for Kenya Airways to compete.
Back in July, the decision was taken to re-nationalize Kenya Airways in a bid to make it more successful. Right now, the airline is owned 48.9% by Kenya, 7.8% by Air France-KLM and 38% by local lenders. The idea of bringing it back under the nation’s wing is to ensure it can be more competitive against other state owned airlines such as African giant Ethiopian.
In an interview with Reuters, CEO Sebastian Mikosz said that there is no time to lose in nationalizing the airline. He is quoted as saying,
“It’s so important…to have the nationalization done speedily, to have an answer about what the future of the airline is in terms of its structure in the next five years.”
He has said that he expects an advisor for the process to be appointed before the close of 2019, and for the nationalization procedure to be completed at some point in 2020. He has also said that the airline is expecting an injection of cash from the government soon, to help improve its current cashflow situation.
It’s been more than two decades since Kenya Airways was privatized. For a while, the initiative was working OK, but a failed expansion plan in 2014 sent the airline into a spiral of debt and losses. This year, the airline reported a first half pretax loss of $83m, more than double that of a year before.
Following the Ethiopian model
Mikosz is planning to leave Kenya Airways by the end of the year, a decision he announced in May. However, he’s clearly keen to set the airline on the right path before he goes. He highlights Ethiopian as an example of how a state-owned airline can work well, provided it follows the right model.
Ethiopian runs various assets as well as the airline itself, including fueling operations and airport. All of these different arms are operated under one single company. This means that the more profitable parts of the business can lend support to those which are less profitable. MIkosz told Reuters,
“This model was created 15 years ago, and it took them 15 years to get from literally a very small local airline to the giant that they are today.”
He believes that a swift government takeover would help Kenya Airways to compete, and could propel it to similar success in the growing African market. And it’s not just Africa he has his eyes on either. He noted that the potential air travel market in China is ten times the size of Africa, and wants Kenya Airways to be in a position to take advantage of this growth.
Analysts remain skeptical that nationalizing the airline will succeed in turning its fortunes around.