A Kenya Airways plane at JKIA, Nairobi. PHOTO | FILE
By MUGAMBI MUTEGI
In Summary
- The government of Madagascar is seeking a strategic investor “willing to invest in the company by taking minority equity shares and by bringing know-how to the airline as well as committing to run it.”
- Kenya Airways’ interest in owning a piece of the Madagascar national carrier, and helping to revive it, comes at a time when it is itself in desperate need of about Sh60 billion to recapitalise the loss-making business.
Kenya Airways has been shortlisted among seven airlines
interested in acquiring a minority stake in Air Madagascar, which is
looking for a strategic partner to help turn around its fortunes.
The management of the cash-strapped Air Madagascar recently
disclosed that Kenya Airways, Air Austral, Ethiopian Airlines, Air
Mauritius and South African Airlink are some of the carriers gunning for
a stake of up to 49 per cent.
The government of Madagascar, with financing from the World
Bank, is seeking a strategic investor “willing to invest in the company
by taking minority equity shares and by bringing know-how to the airline
as well as committing to run it.”
Kenya Airways’ interest in owning a piece of the Madagascar
national carrier, and helping to revive it, comes at a time when it is
itself in desperate need of about $600 billion to recapitalise the
loss-making business.
The airline, which is 29.8 per cent owned by the Kenya's
National Treasury and 26.7 per cent owned by Air France- KLM, has posted
four consecutive full-year losses beginning March 2013.
In the year to March, KQ posted a net loss of $260 million.
“Air Austral, Air Mauritius, South African Airlink and Kenya
Airways are among four of the last seven finalists at the opening of the
bids,” Gilles Filiatreault, Air Madagascar’s general manager, is quoted
as saying by the Madagascan press.
Resume takeoff
The management of KQ, as the airline is known by its international code, did not respond to the Business Daily’s
queries on the matter by the time of going to press. Air Madagascar,
which is majority-owned by the Madagascan government, was founded in
1947.
Madagascar is an island nation in the Indian Ocean off the
southeastern coast of Africa. Its national carrier has a fleet of 13
aircraft which fly to 18 destinations including Paris, Marseille,
Mauritius, Comoros, Reunion, the Seychelles and Mayotte as well as 11
domestic routes.
The carrier has 1,117 employees and is based at Ivato International Airport in Antananarivo, Madagascar’s capital city.
Air Madagascar says it needs about $25 million in the form of a
loan to rescue the company burdened by high-cost debts, an ageing fleet,
high staff costs and unprofitable routes.
A new board and management has already undertaken a reduction in
routes and costs. The government of Madagascar recently engaged
Dubai-based TroyAvi Aviation Consultants to select a suitable strategic
partner, marking the next stage in the rescue plan.
“We are on schedule. Air Madagascar will resume its takeoff in
the first quarter of 2017 with its new strategic partner,” said
Benjamina Ramantsoa, Madagascar’s minister of transport.
Daily flights
Kenya Airways, which operates daily flights to Madagascar, is
bidding for a stake in the ailing airline even as it looks to stabilise
its business back at home.
KQ’s business has in recent years come under pressure due to
expensive loans, low tourist numbers, and the Ebola outbreak in West
Africa among several other negative factors.
The national carrier is implementing a McKinsey-backed
restructuring plan which has led to interventions like sale or lease or
aircraft, balance sheet restricting and staff cuts, aimed at steering
the business back to profitability.
Mbuvi Ngunze, the airline’s chief executive, has in the past
said Kenya Airways requires about Sh60 billion in a mixture of equity
and debt to plug its huge capital hole.
The airline’s precarious financial situation makes its interest in a slice of Air Madagascar unusual.
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