Catalyzes the first step of the biosynthesis of Kdo8N (8-amino-3,8-dideoxy-D-manno-octulosonate) from Kdo (3-deoxy-D-manno-octulosonate). 3-deoxy-alpha-D-manno-oct-2-ulosonate + O2 = 3,8-dideoxy-8-oxo-alpha-D-manno-octulosonate + H2O2 Shows highest activity with Mn(2+) and Fe(2+). Inhibited by EDTA. Bacterial outer membrane biogenesis; lipopolysaccharide biosynthesis. A double kdnA/kdnB deletion mutant shows increased sensitivity to polymyxin B and bile salts. Kdo8N is found in lipopolysaccharides of members of the Shewanella genus. Belongs to the iron-containing alcohol dehydrogenase family.