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Kenya Airways Gears Up for Government Takeover Amid Massive Layoff Reports
In a bid to retain its financial flexibility and optimize on the lack of connectivity throughout Africa, the government of Kenya is on the verge of nationalizing its flag carrier to retain market share while aiding the troubled airline in its restructuring process. Lawmakers passed the nationalization bill which entails a National Aviation and Management Bill that will mark a major shake-up to the country’s aviation industry and presumably aid the airline towards profitability.
Among the key agendas in the bill will be its long-term viability plan by ensuring Nairobi, Kenya becomes the key intercontinental gateway to Africa. Currently, Addis Ababa, Ethiopia remains the largest intercontinental gateway to Africa.
Among other agendas, the bill seeks to create sustainable jobs, increase aviation revenues and double passenger numbers to eight million passengers in five years.
The company’s share went up 31% in value a week after the proposed law seeking to collapse it into an aviation holding company was tabled. The airline also reported a 12.98 billion Kenyan shillings ($120 million) revenue in 2019.
“The balance sheet of the aviation holding company will be healthier than Kenya Airways alone,” said Chairman of Parliament’s Transport Committee David Pkosing in a past interview with Reuters.
Kenya Airways was privatized more than 20 years ago and has been sinking in debt and losses with its peak being in 2014 after a failed expansion drive dubbed as “Project Mawingu.”
A common refrain amongst economists and consultants is that airlines should not be owned by governments and instead be owned by the private sector as this creates the primary basis of competition.
Kenya Airways has been a casualty from the above notion even before the global pandemic, while its closest and regional rival Ethiopian Airlines has been doing exceptionally well as a state-owned carrier. It is important to note that it took Ethiopian Airlines 15 years to transform from a small-local airline to the giant airline it is today.
Due to the impact of the Coronavirus Pandemic, Kenya Airways PLC started a three-month round of job cut with the process expected to be complete by Sept. 30.
According to The Star, Kenya Airways will be sending home 182 pilots with more than 400 crew members facing job losses.
“I regret to advise you of management’s decision to terminate your appointment by giving you one-month notice with effect from June 24,” read a letter signed by Human Resource Officer Evelyn Munyoki.
The exit package also includes salaries and all applicable allowances for June and one month’s salary in lieu of notice.
“The effects of COVID-19 have adversely affected our operations as an airline which has significantly suspended and reduced our operations,” said the group’s CEO Allan Kilavuka.
“We have projected that demand is going to slow down to at least 50% between now and December. Our assets need to reflect that. Our operations need to reflect that, that goes without saying,” noted the CEO. The company employed 3,734 employees at the end of 2019.
The SkyTeam Alliance member announced today the resumption of domestic travel beginning July 15, with international travel scheduled to commence Aug. 1, after three months of air travel suspension. The resumption of services will be in strict conformation to all health protocols from the ministry of health and will coincide with eased travel regulations.
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