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Columnists

KQ can survive without JKIA takeover plan

Jomo Kenyatta International Airport
The Jomo Kenyatta International Airport, which Kenya Airways is banking on to revive its fortunes. FILE PHOTO | NMG 

Kenyans should be excused for harbouring the inaccurate impression that Kenya Airways #ticker:KQ (KQ) has suddenly found itself in a financial dementia whose only prescription for resuscitation is taking over the operations of Jomo Kenyatta International Airport (JKIA) from Kenya Airports Authority (KAA).

What is being fed to the unsuspecting public by the proponents of the JKIA take-over by KQ does not reflect the true picture.

This rationale behind the Privately Initiated Investment Proposal (PIIP) by KQ is therefore not the ultimate solution to resuscitate KQ.

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 being conversion of debts owed to local banks and the government to equity which was implemented in 2017 and resulted in spurring the airlines liquidity and cash-flows.

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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.

Additionally, KQ was expected to proactively engage the government to also 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.

Sadly, KQ pays Railway Maintenance Levy for its jet fuel, yet this levy goes to support a sector seen as a competitor. Of significant importance is that the take-over of JKIA was not one of the recommendations by Seabury.

We are therefore 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?

Great talent

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

It is plainly clear the overriding objective for KQ take-over 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 its 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 (PPP) 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?

The writer is Secretary-general, Kenya Aviation Workers Union.

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