A Kenya Airways plane.[Photo/the-star.co.ke]
When the government privatized Kenya Airways (KQ) in 1996, it was seen as a major turning point for its divestiture programme.
It was also seen as the launching pad for the commercial success of KQ, as the national carrier is known by its international code. KQ’s privatization was hailed as a model.
The airline had been fully State-owned previously, but commercially, it was doing poorly.
From government records, it had made losses totaling over Sh3 billion in the five years preceding its privatization. It also held a further Sh3 billion in debt it owed to the government that had been bailing out its operations. As a business, its customer service was inadequate.
After the privatization, the ownership structure of the airline was drastically altered in favor of private ownership. The ownership was held by KLM at 26 percent as a strategic investor, the public held the majority share at 52 percent, and the government was left with a 22 percent minority share.
Initially, privatization of KQ looked like a resounding success. The airline posted profits year after year. It initiated and implemented a plan of renewal of aircraft. Then, unexpectedly, the airline hit turbulence. It has made huge losses three years in a row.
In 2016, it made a record Sh26.2 billion in losses, only surpassing the Sh25.7 billion loss it made a year earlier. From that point on, it was all the way downhill. Its commercial viability all but collapsed. Its financial data became an accountant’s nightmare. According to its financial reports.
Kenya Airways has loans totaling Sh113.2 billion which include Sh24.3 billion owed to the government and Sh23.2 billion that is owed to 11 domestic commercial banks. A string of bad business decisions over the years seemed to be behind the woes of the airline.