During a visit to the United States in mid December 2022, President William Ruto and his delegation met with the top executives of the United States’ largest carrier Delta Air. This was widely perceived by the public as a pitch by the new government to sell Kenya Airways to Delta Airlines.
It followed public remarks by President Ruto that he was willing to sell KQ. “I’m willing to sell the whole of Kenya Airways Plc. I’m not in the business of running an airline that just has a Kenyan flag, that’s not my business,” President Ruto had told Bloomberg News on the sidelines of the US-Africa Leaders Summit in Washington DC.
He had added that discussions with Delta were at a preliminary stage. “The government is looking for partnerships that will make Kenya Airways a profitable entity whatever that means, in whatever configuration, whatever form it takes.”
This was happening barely three months after Ruto’s inauguration as President following the August 2022 General Elections that whose results were challenged at the Supreme Court.
Fast forward to mid 2024. Currently, the President Ruto’s government is aiming to hand over the Jomo Kenyatta International Airport (JKIA) to a private company from India. Allegedly, the private company known as Adani Airport Holdings that is part of the Adani Group initiated a private proposal to the government for a takeover of the JKIA.
In this proposal, Adani wants to take over and run the JKIA under a Build-Operate-Transfer (BOT) model for a period of 30 years. Within this 30-year period, Adani will be expected to earn at least an 18 per cent annual turnover.
This is not a proposal that was willingly made publicly. Details of the proposal were leaked to the public. The proposal by Adani had been kept secret by the government through the KAA. The KAA only admitted about it after it was leaked to the public.
In justifying the proposal, KAA claimed that the airport was built in 1978 and has aging infrastructure that is a threat to Kenya’s regional competitiveness. “KAA received an investment proposal under the Public Private Partnership Act 2021… [for] an investment in a new passenger terminal building, second runway, and refurbishment of the existing facilities at [the airport],” said KAA.
Though KAA claimed that what it had was just a proposal, it went ahead to state that staff working at the airport will not lose their jobs with the entry of the Indian company. KAA went on to state that the expanded airport will be good for business – in what appeared to be a foregone conclusion for an impending takeover of the airport by Adani.
The handover of the JKIA to a private Indian firm is expected to result in job losses for Kenyan employees currently working at the facility. Employees currently working at the JKIA who are employed by the KAA will be forced to renegotiate their work contracts with Adani.
At the same time, these employees will be forced to accept new terms and conditions as one basis for any rehiring that might take place. According to the proposed concession terms by Adani, not all employees will be rehired. The firm proposes that it will only absorb a portion of the current workforce.
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The firm has also proposed to bring in foreign workers as part of its new workforce. These foreign workers, it is expected, will replace Kenyans who will be released by the firm.
“[Adani] shall offer employment to a mutually agreed percentage of present KAA employees on terms and conditions as recorded in the concession agreement… [Adani] may employ non-Kenyan employees,” part of the proposal by the firm states.
When justifying the handover of the JKIA to Adani, President Ruto said during a townhall meeting in Mombasa that Rwanda and Ethiopia.
“The airport we have in Nairobi is made of canvas in the arrivals. This is a temporary structure we put up almost 7 years ago. Ethiopia, Rwanda have a brand-new airport. It is the reason why we need to work with investors to give us a new airport,” he said while refuting claims he is selling off the airport.
However, the proposal model from Adani is far from what Rwanda and Ethiopia have used to build their airports. In Rwanda, the Kagame government is building a brand new airport from scratch in an investment partnership with the globally renowned Qatar Airways Group.
In the new airport, said RwandAir CEO Yvonne Manzi Makolo, Qatar Airways will be the majority shareholder with a 60 per cent stake. The airport is being built south of the capital Kigali in the Bugesera District. Qatar Airways is also looking at taking 49 per cent of RwandaAir.
In Ethiopia, the Ethiopian Airlines Group is planning a new airport that will be capable of serving 100 million passengers annually. The new airport will be located in Bishoftu, some 40 kilometres outside of Addis Ababa. It is expected to be linked to the city by a planned passenger rail system.
The new airport will be constructed in three phases at a total estimated cost of $4 billion. The first phase, which is expected to be completed by 2028, will include two terminals. French engineering and design company Groupe ADP developed the master plan and site selection.
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Although President Ruto’s 2022 pitch to sell Kenya Airways did not materialize, the bid to have “a strategic investor” takeover the national carrier is not completely off the table.
In April this year for instance, the airline chief executive officer Allan Kilavuka in a interview with a local television said that KQ is anticipating to close a deal with a foreign investor who will acquire up to 49 per cent in the airline before the end of year 2024.
“We are looking for an equity investor that can invest up to a maximum of 49 per cent,” said Kilavuka. “This is the maximum because the rules and regulations in Kenya do not allow you to have a Airline Operating Certificate (AOC) if you have more than 50 per cent foreign ownership.”
The move will mean that the new foreign investor will automatically become the majority shareholder at Kenya Airways.
Currently, the government stands as the majority shareholder with a 48.90 per cent stake, followed by KQ Lenders Company 2017 Limited with a 38.09 per cent stake, Dutch airline KLM with a 7.76 per cent stake, Kenya Airways employees with a 2.44 per cent stake, while the remaining shares are spread across other 7 shareholders.
“The ideal investor will be the one who gives us the capitalization that we are looking for,” said Kilavuka.
