KQ defends partnership plan with Kenya Airports Authority

In Summary

- KAA and KQ are yet to engage the public in the participation process but will do that at the right stage, says proposal.

- KQ maintained the business model has been proven successful in many other countries.

Kenya Airways plane at JKIA
Kenya Airways plane at JKIA
Image: FILE

Kenya Airways has denied claims it rushed into a deal to take over management of the Jomo Kenyatta International Airport without proper consultation.

The national carrier, in efforts to clarify pending issues over the proposed partnership, said KQ and Kenya Airports Authority (KAA) followed the mode of engagement outlined by the Public-Private Partnership Act 2013.

KQ said it has finalised due diligence to assess initial assumptions.

“The project is still in the early stages. Despite the progress, none of the transaction sides has initiated the negotiations process. KAA and KQ are yet to engage the public in the participation process but will do that at the right stage,” reads part of the merger proposal.

It said it is essential for the public to understand the importance of the project not only to KQ, JKIA or the aviation sector, "but to the well-being of the employees themselves and a positive impact of the transaction on the country’s economy".

It said both KQ and the government can, in the short-term benefit from the integration of aviation assets "as it will bring synergies between the airline and airport".

MPs last month opposed the partnership plan.

The National Assembly Public Investments Committee chaired by Abdulswamad Nassir said the deal between KQ and KAA raises questions.

“From the face value, this is a bad deal. As a committee that plays oversight on such investments, we want to get the nitty-gritties. Jobs are at stake and we’ll also be interested to know why they want to give it to a loss-making entity,” Nassir said.

But KQ maintained the business model has been proven successful in many other countries and it will not only resolve KQ’s financial issues thus ending the airline’s reliance on government funding.

“As a result of the project, Kenya Airways will be able to invest in fleet expansion and also secure funding necessary for development of JKIA at the same time establishing new profit centres such as cargo and ground services facilities, a Maintenance Repair and Overhaul Centre for Africa, catering, fuel distribution or training & development centre,” the proposal stated.

It further read, “Consequently, JKIA will significantly benefit from introducing the transaction by upgrading the current infrastructure to accommodate expected growth in traffic like an upgrade of runway, taxiways and aprons, remodelling existing terminals, constructing a new terminal and increasing revenues from all sources”.

In the proposal seen by the Star, Kenya Airways is proposing to be granted a concession to operate, maintain and develop Kenya’s main airport – JKIA through a Public Private Partnership (PPP) structure.

CURRENT AIRLINE INDUSTRY SITUATION

KQ argues that Kenya has long been the aviation powerhouse in East, Central and Southern Africa, with a resilient national airline and strategic hub.

However, it says the aviation landscape globally has undergone rapid changes in the past decade and Kenya has not adapted in an agile manner.

“Consequently, the Kenyan aviation sector is facing a steady decline, characterised by the turbulence experienced by the national carrier as well as loss of business at Jomo Kenyatta International Airport (JKIA) to other competing hubs,” the proposal stated.

According to KQ, Kenya’s current aviation operation model does not facilitate the growth of both KQ and JKIA, as it gives preference to foreign carriers.

It said while KQ has a three per cent impact on GDP, Ethiopian airlines contributes 7 per cent and Air Mauritius contributes 5 per cent.