Photo/FILE Contrary to earlier fears, Kenya Airways has not lost its status as a national carrier as the combined shareholding of the government and local citizens and institutions have met the 51 per cent threshold after the rights issue. 

A large number of small shareholders in Kenya Airways did not take part in the recent rights issue, resulting in under-subscription.
Although the official results are expected to be announced on Wednesday, the Nation can reveal that the total subscription level was 77 per cent.
The stake held by Kenyans and institutions, which was at 39 per cent before the rights issue, has now come down to 23.8 per cent.
With the under-subscription, and considering that the government had applied for its full entitlement of shares, the stage has been set for government’s stake in the airline to increase from the current 23 per cent to approximately 27.9 per cent.
Thus, contrary to earlier fears, Kenya Airways has not lost its status as a national carrier as the combined shareholding of the government and local citizens and institutions have met the 51 per cent threshold after the rights issue.
The complication, however, is that according to the Capital Markets regulations, the government cannot increase its shares to beyond 25 per cent without declaring a takeover.
As we went to press, sources said the government had applied to the Capital Markets Authority for a waiver of this rule to send the message to markets that it has no intention of taking over the company.
According to the number of shares applied for by existing and other shareholders, the shareholding of KLM will also increase from the current level of 26 per cent to 33 per cent. 
This more or less retains the balance of power between the two anchor shareholders in the company — the government and KLM.
The poor response to the rights issue by small investors is a reflection of several factors including the bearish conditions that prevailed throughout the period of the rights issue, poor appetite from institutional investors, and profit warning the airline made ahead of the issue.
The fact that the issue was going on against a backdrop of a raging controversy and murmurs within the brokerage community over the inequitable manner in which the brokerage commission business for the rights issue was shared out among the leading brokers undermined support for the rights issue by sections of the brokerage community.
Kenya Airways will use the money from the issue to service aircraft orders it has already committed.