Kenya Airways future bleak as MPS reject merger with Airport Authority
- Members of Parliament have suspended a proposed merger between Kenya Airways (KQ) and the Kenya Airports Authority (KAA), leaving the cash- strapped national carrier facing a bleak future based on its weak financial standing.
The Public Investments Committee (PIC) said the proposed merger would render the profitable aviation regulator, KAA, bankrupt in a turn of events that now threatens to stall a process that was intended to hand the ailing airline a financial lifeline.
A Cabinet paper prepared in May last year had warned that Kenya Airways had less than one year to survive if the merger flopped and the carrier did not get a significant capital injection.
“This committee rules that no final transaction should proceed on this matter until this House concludes its investigations.
"We are directing the Auditor-General to move fast and undertake a forensic audit on this transaction. We will be writing to you to that effect,” Mvita MP Abdulswamad Nassir told KAA managing director Johnny Andersen. Mr Nassir is also the PIC chairman.
Documents tabled in Parliament by Mr Andersen show that the KAA board of directors was apprehensive of the Privately Initiated Investment Proposal (PIIP) tabled by KQ with the backing of the Cabinet.
KAA, which collects Sh7 billion from Jomo Kenyatta International Airport (JKIA) annually, will collect Sh2.9 billion if the KQ deal sails through this year, the KAA board said in confidential minutes of a meeting called to carry out a preliminary evaluation of the deal.
“While comprehensive risk assessment of the proposed transaction will be concluded as part of the detailed due diligence, the Board should take note… if JKIA is concessioned out, the arrangement will deprive KAA significant resources given that the concession fee will not significantly cover the operational and CAPEX costs of the remaining airports, airstrips and head office,” the board minutes say.
A prolonged delay of the merger puts Kenya Airways in a precarious financial position.
The deal was intended to put the national carrier on a stronger financial footing to compete effectively with rivals such as Ethiopian Airlines and Middle East carriers.
The Cabinet memo prepared last year noted that Kenya Airways’ recent financial restructuring to the tune of Sh75 billion ($750 million) was insufficient to resolve its challenges.
The memo says that KQ's fortunes must now be hooked on a comprehensive national aviation policy that includes offering it significant tariff breaks.
“Currently, JKIA accounts for nearly 83 percent of KAA’s revenues and 51 percent of the recurrent expenditure,” says the KAA board. Daily Nation Kenya.