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AIRLINE HAS OTHER MORE VIABLE OPTIONS

KQ can survive without taking over JKIA operations

In Summary

• What value—financial or otherwise—would KQ bring into this transaction?

• KQ has neither the financial capacity nor the knowledge and experience to run and manage an airport

JKIA arrivals and departure terminal
BAD DEAL? JKIA arrivals and departure terminal
Image: FILE

Kenyans should be excused for harbouring the false impression that Kenya Airways has suddenly found itself in a financial dementia whose only prescription is taking JKIA operations from the Kenya Airports Authority.

What is being fed to the public by the proponents of the Jomo Kenyatta International Airport takeover by KQ is not the true picture.

What is being pushed out to the public as the rationale behind the Privately Initiated Investment Proposal by KQ is a wrong proposition that it is the sole miraculous and 'God-sent idea' to resuscitate KQ. Nothing could be further from the truth.

In February 2017, an international consultancy firm, Seabury Group, contracted by KQ to advise the airline on a viable turnaround strategy made very plausible recommendations.

Key among them was conversion of debts owed to local banks and the government to equity, which was implemented in 2017. It resulted in spurring the airline's liquidity and cash flow. Another recommendation was on how to engage the unions, which KQ is yet to embrace.

KQ was also to engage the government on tax waivers on imported aircraft parts and other materials used for aircraft maintenance as well as enactment of a law to ensure all government employees and contractors utilise KQ for their travel.

PUBLIC PRIVATE PARTNERSHIP

The Public Private Partnership Act envisages a situation where both parties to the partnership benefit. How then does it benefit KAA to cede its premier cash cow to KQ in exchange for a concession fee less than one third of its current earnings?

Additionally, KQ was expected to proactively engage the government to waive taxes on jet fuel to save the airline over Sh7 billion annually, an amount that is more than what KQ would generate out of running JKIA. 

Of significant importance is that the takeover of JKIA was not one of the recommendations by Seabury. We are convinced that this deal is driven by other motives in lieu of sound recommendations made by Seabury.

Why would KAA be made to relinquish its most profitable business unit to save KQ, when there are other plausible options to achieve the same if not better?

Over the last seven years KQ has continued to sink in losses (the net loss improved from Sh5.6 billion in 2017 to Sh4 billion in 2018), even after engaging a foreign chief executive who was said to be a turnaround expert and more than a dozen other foreign “airline experts.”

This team, led by KQ boss Sebastian Mikosz, has failed the airline and it is time they exit if KQ is to recover.

KQ has a rich reservoir of great talent of well-skilled men and women able to run the airline but the majority, who are dejected, have found solace with Gulf carriers. Over 500 KQ employees have in the last five years left for Middle Eastern airlines, which offer better terms.

It is plainly clear the overriding objective for KQ's takeover of JKIA has to do with finances. The net effect of this transaction, if it ever goes through, is a financially diminished, empty and hollow KAA, unable to execute it’s mandate.

This begs the question, what value—financial or otherwise—would KQ bring into this transaction? KQ has neither the financial capacity nor the knowledge and experience to run and manage an airport.

The Public Private Partnership Act envisages a situation where both parties to the partnership benefit. How then does it benefit KAA to cede its premier cash cow to KQ in exchange for a concession fee less than one third of its current earnings?

Efforts towards recovery of KQ should therefore be conducted within the limits of the Constitution, statute and international conventions. Outright discrimination and exploitation of employees should never be tolerated in the guise of reviving the airline.

Secretary general, Kenya Aviation Workers Union