MPs are proposing the formation of an Aviation Holding Company (AHC) to oversee the restructuring of Kenya’s aviation sector. In the plan, the company will manage Kenya Airways, Kenya Airports Authority, Jomo Kenyatta International Airport and an Aviation Services College.
In a report to be tabled in parliament, the National Assembly Transport, Public Works and Housing Committee concluded that the current Project Implemented Investment Plan (PIIP) is not a feasible solution for reviving the sector.
The MPs are also proposing the nationalisation of Kenya Airways (KQ) in an effort to reposition Nairobi as a leading African aviation hub and secure the country’s aviation assets.
Committee chair David Pkosing who is the Pokot South MP, expressed concern over the financial state of KQ, noting that the national carrier’s mounting debt—currently guaranteed by the government to the tune of Sh75 billion—poses a significant risk to the country.
“The Committee noted that taking into account KQ’s current financial status and the current lack of competitiveness of Kenya’s aviation industry, the Government and the people of Kenya stand to lose the most in the event the trend is left to continue,” said Pkosing in the report.
The proposed AHC would consist of the four subsidiaries, where JKIA Company will manage the Nairobi-based international hub, including ground handling and catering services.
Kenya Airports Authority (KAA) will oversee other airports and airstrips, with a mandate to maintain at least one serviceable airstrip per county for security and emergency purposes, while Kenya Airways (KQ) will be the national flag carrier and Aviation Services College/Institute: to centralize aviation training.
“Under its new mandate KAA shall maintain at least one serviceable airstrip in each county for purposes of security, health and other emergencies,” recommended the committee.
To streamline operations and reduce bureaucracy, the committee called for the nationalisation of KQ to be accompanied by amendments to key legislation, including the Public Finance Management Act, the Public Procurement and Asset Disposal Act, and the State Corporations Act.
These changes would allow the new AHC and its subsidiaries to operate with greater financial autonomy and flexibility.
The committee also recommended a series of tax concessions and exemptions for the AHC, including zero-rating of supplies, customs duty exemptions for aircraft parts and accessories, and waivers on excise duties for aviation fuel, among other incentives.
This aimed at improving the financial sustainability of the AHC and KQ, allowing them to compete more eff ectively within the region. The report further suggested a review of KQ’s aircraft leasing agreements to renegotiate favourable terms.
“Upon nationalisation of KQ, the government reviews the aircraft leasing agreements entered into by KQ with a view to renegotiating better terms on account of the consolidated balance sheet of the Aviation Holding Company, improved KQ cash flow and a lowered risk profile of Kenyan aviation assets.
Any future leasing arrangements for aircraft must be cost-effective,” the report reads in part. The MPs are also recommending for the rationalisation of KQ’s staff and a review of collective bargaining agreements were also proposed to harmonize employment conditions across the new aviation structure.
“Upon nationalisation of KQ, the state
undertakes a staff rationalisation
programme with a view of retaining existing staff and harmonizing
the terms of service and remuneration under the Aviation Holding
Company, including a review of the
Collective Bargaining Agreements.”