A Case Study in Privatization
The privatization of Kenya Airways was the first-ever privatization
of an African airline. The sale of a major state-owned asset is usually
a highly charged political event, and the two-year process by which 77%
of the shares of Kenya Airways were sold to a broad array of private investors
was no exception. From the outset the press and public of Kenya speculated
as to how and when the process would fail, and which interests would profit
from that failure. Yet the privatization was carried out successfully.
Privatization and the formation of cross-border
alliances are trends in the airline industry and
in many other industries. This case study examines the privatization
of Kenya Airways as a means for fostering discussion and critical thinking
about privatization, liberalization, and enterprise restructuring.
Background material on this case includes:
A basic question for both policy makers and the public is "why
privatize?" Important answers, which must be evaluated based on economic
reasoning and the facts of the case, are:
The benefits from privatization depend significantly on how it is carried
out. To effectively implement a privatization, policy makers must:
For each of these areas, this case study considers the general issues,
specific policy steps taken in the Kenya Airways case, and relevant factors
for considering alternative policies. While there is no universal
formula for successful privatization, well-thought out policy is important
for ensuring that privatization produces widespread public benefits.