KQ boss says merger is the only way out

The proposed partnership between Kenya Airways (KQ) and the Jomo Kenyatta International Airport (JKIA) is the only way to save the national carrier from being overrun by rival African and Gulf airlines, chief executive Sebastian Mikosz told MPs on Wednesday.

The KQ boss, who appeared before Parliament’s Transport, Housing and Public Works Committee to defend the controversial plan, named Ethiopian Airlines, RwandAir, Emirates, Qatar as well as Turkish Airlines as the biggest threats to Kenya’s dream of becoming an African aviation hub.

All the rival airlines, he said, are beneficiaries of merged operations between their national carriers and their main airport operators.

“We decided to copy what the competition is doing already. All these (competing airlines) are organised in the manner that we are proposing in this document.

All the airlines that are struggling such as the South African Airways and Air Mauritius are working with a model that we currently do,” said Mr Mikosz in his presentation.

Two parliamentary committees are conducting hearings on the proposal to merge operations of KQ and JKIA, in a transaction aimed at handing the cash-strapped national carrier a financial lifeline.

The Public Investments Committee (PIC), a separate House committee, last week directed suspension of the proposed transaction, pending conclusion of its ongoing investigation into the proposed deal that Kenya Airports Authority managing director Johnny Andersen said the airports regulator did not initiate.

Restructure aviation sector

Mr Mikosz appeared before the Transport Committee alongside Mr Andersen and Transport Principal Secretary Esther Koimett.

The KAA and the KQ chief executives differed sharply on the proposed merger of JKIA and KQ’s operations, but agreed on the need to restructure the country’s aviation sector to reverse the trend where Kenya has been losing aviation market share to its competitors in the region.

“KAA has not accepted the KQ Privately Initiated Investment Proposal (PIIP) proposal. We are doing due diligence and the evaluation we have done on the proposal has shown us significant gaps that we need to address to ensure we are on right side of history,” Mr Andersen said shortly after Mr Mikosz pitched the proposal to the Transport Committee chaired by Pokot South MP David Pkosing.

The Planning PS handed the PIIP document to the MPs, but asked them to treat it as a confidential document given the sensitivity of financial proposals contained therein.

“Because of confidentiality on financial data, we request the PIIP should be taken under confidentiality arrangement of Parliament. This is sensitive information we don’t want other airlines to get,” said Ms Koimett.

KAA has in board minutes tabled before the PIC revealed fears that the proposed merger of operations could bankrupt it, but Kenya Airways says the plan could in fact attract foreign investments into Nairobi as an aviation hub.

A strike called by KAA workers to oppose the merger was suspended after intervention by Transport Secretary James Macharia.