10 April 2019

Kenya: KAA Rejects Kenya Airways' JKIA Takeover Plan Over Resources

Photo: William Oeri/Daily Nation
Passengers at the International Departures hall of Jomo Kenyatta International Airport (file photo).

The Kenya Airports Authority (KAA) has rejected a proposal by national carrier Kenya Airways (KQ) to takeover operations of the Jomo Kenyatta International Airport (JKIA) for 30 years.

The KAA on Wednesday told the National Assembly's Transport, Public Works and Housing committee that KQ had no financial and technical capacity to run the airport.

While making submissions to the committee led by David Pkosing, the KAA management noted the difference between running an airline and an airport and said it was skeptical about the national carrier's Privately Initiated Investment Proposal (PIIP).

HUGE DEBT

Led by Chief Executive Officer Johnny Anderson and chairman Issac Awuondo, the authority questioned KQ's financial strength to takeover the JKIA.

The two told the lawmakers that there was need to look for an alternative to help the airline reverse its dwindling fortunes.

The authority informed MPs that Kenya Airways owed it Sh5.4 billion as at March 31.

"We have been very forceful in the recovery of the debt but the reality is that they have been unable to pay. Had it been other airlines, we would have grounded them," said Alex Gitari, KAA's General Manager for Finance.

He said the debts must be given a priority in the PIIP.

"SIGNIFICANT GAPS"

Mr Gitari also told the committee that the airline had failed to honour its obligations despite numerous agreements.

"After assessing the deal we found significant gaps. Should the matter proceed to the negotiation stage, we will seek to have the concerns we have raised addressed first," Mr Anderson said.

"We are custodians of a public asset so we have to focus on the facts on the table before signing anything."

Mr Anderson also expressed concern about the fate of the 18 airstrips in various parts of the country should KQ take over the JKIA.

He said the airport contributes 80 percent of KAA's revenue, Sh12 billion annually, which is used to operate and develop other airstrips in various parts of the country.

"If Kenya Airways is not able to address the issues, twe need to look at other options," he said.

CONFLICT

Mr Awuondo told the committee that he was ready to resign over the conflict of interest in the impending takeover.

He is also the group CEO of Commercial Bank of Africa, which is owned by the Kenyatta family and which has shares in Kenya Airways.

The airline owes CBA Group Sh3.1 billion, the NIC Sh2.1 billion, Equity Bank Sh5.2 billion, National Bank Sh3.5 billion, Co-operative Bank Sh3.3 billion, DTB Sh2.1 billion and KCB Group Sh2.1 billion.

CBA and NIC, which are at an advanced merger stage, are said to have lent the troubled airline Sh5 billion which it is yet to recover.

"There are many options to consider including resigning. If that is the feeling of the members then I might consider it but I don't believe this is the right forum to discuss that," Mr Awuondo said.

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