The Kenyan government has put plants to merge Kenya Airways (KQ, Nairobi Jomo Kenyatta) and Nairobi Jomo Kenyatta airport operator on a back burner, the Business Daily has reported.

"Following concerns that have been raised by the public, we are now exploring other opinions of delivering the objectives of the government to consolidate our aviation sector," Transport Secretary James Macharia said before the National Assembly’s Transport committee.

The plan foresaw granting a 30-year concession for the main Kenyan gateway to a newly formed subsidiary of the flag carrier. CEO Sebastian Mikosz defended the plan, saying that it would "result in more jobs, more connectivity and more contribution to the GDP".

The Kenya Airports Authority (KAA) previously opposed the deal, pointing out that its financial terms were not favourable. The annual concession fee was set at KES2.9 billion shillings (USD28.7 million) per annum in 2019 with gradual increases to KES3.6 billion shillings (USD35.7 million) in 2028.

"If Jomo Kenyatta International Airport is concessioned out, the arrangement will deprive KAA significant resources given that the concession fee will not significantly cover the operational and CAPEX costs of the remaining airports, airstrips and head office," the airport operator said in non-public minutes.

The Sunday Standard has reported that the government is currently evaluating various options for saving the loss-making flag carrier. Among the proposals is the creation of a new holding, Kenya Aviation Airline Group, which would integrate Nairobi airport, Kenya Airways, and the KAA. It would also run hotels and taxi businesses. During the formation of the holding, the government would buy out private shareholders of Kenya Airways, including local banks and KLM Royal Dutch Airlines (KL, Amsterdam Schiphol).

Another proposal focuses on providing incentives to Kenya Airways to restructure as a standalone company.

Another discussed option, which was eventually rejected, was to let Kenya Airways go bankrupt and to create a new airline on the basis of the liquidated flag carrier.

The Kenyan Treasury also disclosed it guaranteed the flag carrier's loan of KES20 billion shillings (USD753 million) from Eastern and Southern African Trade and Development Bank in June 2018. The airline took the ten-year loan in mid-2018 to repay an earlier loan of similar value taken in 2016 from African Export-Import Bank.

"The loan was borrowed to refinance and cancel the 2016 syndicated loan facility borrowed to support the turnaround process of Kenya Airways through the restructuring of its balance sheet," the Treasury explained to the parliament.

The new loan is due for repayment in twice-yearly instalments between June 2019 and June 2029.