Chris Kirubi predicts rosy future for Kenya Airways

Monday September 21 2015

By LILIAN OCHIENG
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Billionaire investor Chris Kirubi forecasts a rosy future for loss making Kenya Airways, planning more investments in millions of shillings as investors shy away.

Mr Kirubi Monday told the Nation that on top of the 2.1 million shares he acquired in August, he will invest more millions surpassing the Sh11.6 million.

“I am showing support for KQ, it has a bright future as a carrier owned by Kenya — the hub of growth in East Africa, let more Kenyans come on board in saving the situation," said Mr Kirubi during an interview at his office Monday.

The move comes even as government turned down a proposal by the National Taxpayers Association to take up 51 per cent shares at the beleaguered airline.

Taxpayers have urged government to take up shares and restructure the management instead of bailing out the airline.

Government has 30 per cent shares at KQ while Air France KLM owns 26 per cent of the carrier. Experts have since pointed out that the Sh25.7 billion loss at KQ was as a result of mismanagement and lavish spending.

Economic Analyst Karithi Murimi told Nation that Kirubi’s move is mere speculation: “investors always play around with any counters that government will not allow to go down, there is security in a seriously watched counter.”

He added that Kirubi has majority shares at Investment firm Centum and could know the turnaround strategy for KQ. This gives investors confidence to buy shares at the ailing carrier.

Contrary to analyst expectations, Kenya Airways shares yesterday traded at Sh5.55 per share the entire day following news of Kirubi’s investments. The shares were at 5.70 on Friday last week.

Mr Kirubi has urged policy makers to consider a multilateral air service agreement with East African Community member countries.

This implies that Kenya as the hub of EAC, could take up to 20 international flights per week as government also subsidises KQ regional rates.

Kenya Airways said its pre-tax loss had grown from Sh4.86 billion to Sh29.71 billion in the year ending March 2015.

This prompted public outrage about the performance, its counter at the Nairobi Stock Exchange has since been dormant with investors trading below their earlier limit.

Competition from Gulf carriers, a loss of Sh5.78 billion caused by fluctuations in the price of crude oil and Ebola outbreak in West Africa are among main impediments in KQ’s growth.

Last month KQ announced it had chosen the African Export-Import Bank in Cairo to advise it on raising capital and arranged a Sh21 billion ($200 million) bridging loan.

According to Treasury Cabinet Treasury Mr Henry Rotich, the airline may require about a Sh60 billion bailout.

At the moment, McKinsey and Seabury consultants — hired by KQ to advice on future investments — are preparing a turnaround strategy that will be availed soon.