Parliament summons two Cabinet secretaries over KQ

Parliament on Monday summoned Treasury secretary Henry Rotich and his Transport counterpart James Macharia to appear before it and explain how they intend to rescue debt-ridden national carrier Kenya Airways.

The airline, popularly known as KQ, last week announced a record Sh25.7 billion net loss in the year ended March, revealing that it is insolvent to the tune of Sh5.9 billion.

The National Assembly Transport committee, which is chaired by Starehe MP Maina Kamanda, issued the summons through Transport permanent secretary John Mosonik.

The hearing comes as the Senate Select Committee chaired by Kisumu Senator Anyang’ Nyong’o announced that it will continue interrogating KQ’s difficult position with the airline’s management, shareholders and other stakeholders.

Prof Nyong’o believes the national carrier can be turned around if sound recommendations are quickly reached and implemented.

The senator said in a statement that the committee was keen on finding a solution to KQ’s troubles and has since held several meetings with its management, unions representing pilots and cabin crew, and two public hearings but the work was yet to be completed.

“Evidence so far gathered shows that the airline faces major problems which the committee is looking deeply into with the management as well as other stakeholders,” Prof Nyong’o said.

The team comprising 11 senators is investigating alleged poor investment decisions by the management – including the buying and leasing of aircrafts, and fuel hedging under arrangements that are not profitable to the company thereby leading to skyrocketing indebtedness.

Kenya Airways in the year ended March 2015 reported a Sh5.8 billion unrealised loss after a fuel hedging plan went bad in the wake of a steep fall in crude prices starting last year.

READ: KQ services unattractive to travellers, parliamentary probe finds

The amount could, however, become due in the future if fuel prices persist below the undisclosed point at which KQ had hedged its exposure.

The airline has since secured Sh20 billion bridging finance to stay afloat, further widening its liabilities that stood at Sh187.9 billion as of March.

The senators are also probing an alleged expensive ticketing system which is non-competitive in the market, leading to loss of passengers as well as revenue.

Further, the lawmakers are scrutinising the routing arrangements and partnerships that have been partly blamed for massive loss of revenue.

Problematic human resources policies and practices that have caused long drawn industrial unrest and the frequent cancellation of flights – causing inconvenience and poor relationship with passengers – are also under scrutiny.

Mr Kamanda wants Mr Rotich and Mr Macharia to provide an updated status of KQ’s affairs and mechanisms so far put in place to rescue the company from sinking into further debt.

“We want to know what the status of the national carrier is because it is partly owned by the government before we can even be seized of the matter,” the Starehe MP told Mr Mosonik who appeared before the House team to discuss the Roads Bill 2015.

But the committee was unable to receive a preliminary response from Mr Mosonik on happenings at KQ.

The PS told the committee to allow time for the ministry to consult the Treasury on the actual status of the airline before giving an official position.

“If I give you my preliminary view, it may be inaccurate. I would need to contact the Treasury on this. It is an issue that falls both under our ministry and the Treasury and it is fair that we respond to an issue when we have gathered enough details. We will also have to talk to KQ’s management on its future plans,” the PS said.

The committee said it would pursue the matter to ensure that those responsible for KQ’s losses are punished.

“We will also not talk of any bailout plans before proper action is taken on anyone responsible for the massive losses. Kenyans want to know if it is the current management that has failed to adhere to prudent management of the airline or if the company was messed up by individuals who have since retired,” Mr Kamanda said.

Mr Kamanda also waived the seven-day mandatory notice committees have to summon Cabinet secretaries due to the urgency of the matter.

“We want the team of Treasury and Transport to appear before us on Thursday. Ensure that you communicate our message to the two ministers,” he said.