Kenya Airways could see a new turn of events in airline operations. Lawmakers in Kenya have agreed to a plan that renationalizes Kenya Airways. This comes after recent financial hardships and the CEO's resignation.

The deal lawmakers agreed to

On Tuesday, July 23rd, according to Reuters lawmakers in Kenya's parliament voted to nationalize Kenya Airways. The plan is multifaceted and is intended to improve operations and restore Kenya Airways to profitability.

First, Kenya Airways will not be taking over the Jomo Kenyatta International Airport in Nairobi. This previously was a plan for the carrier in an attempt to drive up revenue. With government support, however, it seems that this move would be unnecessary.

In addition, the government is methodically planning on nationalizing the airline, as per an implementation plan. This plan and timeline are the responsibility of the government.

Lastly, the government is seeking to consolidate aviation assets. This would include folding Kenya Airways into an aviation holding company. This holding company would also operate Jomo Kenyatta Airport. A report also recommends this company to receive tax concessions.

Furthermore, the report also promotes keeping the holding from having to pay excise duty on goods such as jet fuel, which can be incredibly expensive. As such, this move would help the holding company save a significant sum of money.

The current state of affairs at Kenya Airways

Kenya Airways is not completely privatized, as 48.9% of the airline is government-owned. Of the remaining share, 7.8% belongs to Air France-KLM. The Skyteam members have been working with Kenya Airways to improve the carrier's financial situation.

As of now, it is unclear how Air France-KLM will be compensated with the nationalization of the airline.

Government intervention in the airline market

Some airlines receive subsidies from the government, whereas others are wholly owned by their government. State-run airlines have different results across the world. Some airlines, like South African Airways and Air India, are undergoing significant financial stress. On the other hand, carriers like Ethiopian have done quite well.

Is this good for Kenya Airways?

Kenya's government previously owned Kenya Airways in the 1990s. Although, with re-nationalization, there come significant challenges. In some cases, governments can stifle the growth of an airline. This is especially true if there are few aviation experts working with the government to run the airline.

However, this could also be good for Kenya Airways. With government backing, Kenya Airways could pursue a fleet expansion and build up their connecting traffic. This can put Kenya Airways in a position where they are better able to compete with the likes of Ethiopian Airlines in the African aviation market.

Overall

Ultimately, the biggest question is how this process will play out. If done smartly, the nationalization of Kenya Airways could help build up the airline's position in Africa. However, if done sloppily, the airline could be another in a list of failed government-run airlines. To sum up, only time will be able to tell how this will play out for Kenya Airways.

Is nationalization the right move for Kenya Airways? Let us know in the comments!