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Shipping & Logistics

KAA shelves key projects as sources of revenue dry up

Alex Gitari
KAA managing director Alex Gitari. FILE PHOTO | NMG 

The Kenya Airports Authority (KAA) has suspended some of its capital expenditure projects that had been slated for this financial year as the agency seeks to cut costs in the wake of Covid-19 that has impacted negatively on its income.

KAA managing director Alex Gitari said the agency is now working on cutting costs in the wake of reduced operations that have significantly eaten into their revenues. Speaking during a webinar session organised by the Airports Council International (ACI), Mr Gitari said they need to maintain the funds that they have at the moment, which can push them for the next six months before they seek government support.

“We had to relook into our capital expenditure project and reanalyse our priorities and rationalise budget by suspending for some time any project not critical for safety and operation of our customers. As a result of that we have put aside significant projects on hold,” said Mr Gitari. “We recognise our operations have been low. We need to align our operation cost to that reality. However, there are costs we cannot avoid so we have to do with them,” he added.

Mr Gitari did not, however, disclose the list of the projects that have been suspended. Some of the projects that KAA is due to start implementing include the multi-billion second runway.

The agency, he said, is negotiating with long-term financiers to restructure the loans in order to provide them with cash flow relief.

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He said the authority has already communicated to government on the matter, indicating that they would need some support at “a given point”. KAA, which is one of the parastatals that have had a strong balance sheet, had last year in December given Treasury Sh12 billion in special dividends to support some government programmes.

The agency is currently surviving on limited earnings coming in from the cargo flights that are still operational and the reserve funds that it has accumulated over time.

KAA normally makes the bulk of its earnings from charges they levy airlines for parking and landing at the facility and also from rent that they collect from businesses that are based at the Jomo Kenyatta International Airport.

A lack of activities at the airport means that businesses such as duty free shops cannot operate for lack of traffic, hence are unable to meet their rent requirements.

The carriers, including Kenya Airways #ticker:KQ, had anticipated that they would resume domestic flights on June 8, anticipating that President Uhuru Kenyatta would lift restriction on movement in and out of Nairobi when he addressed the country last Saturday.

However, Mr Kenyatta extended the lockdown for another one month, coming as a big blow to carriers who have been out of service since the outbreak of Covid-19.

However, Mr Kenyatta last week gave an indication that he would be lifting restrictions on cessation of movement between counties in order to allow KQ to resume domestic flights in the next couple of days.

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