Kenya Airways push to run airport blamed on wheeler-dealers

Saturday February 23 2019

Pressure to have troubled national carrier Kenya Airways run the Jomo Kenyatta International Airport has continued to elicit mixed reactions with some stakeholders now reading powerful business hands pushing for the takeover of the lucrative airport.

Cash-strained for years after its ambitious fleet expansion plan dubbed “Project Mawingu” tumbled, the airline has been through one low after another even as its leadership keeps on changing.


The latest effort to stabilise the carrier has provoked its own turbulence with questions emerging on just who wants KQ in charge of the country’s largest aviation facility and for what reason.

This week, Kenya Airports Authority (KAA) has twice been to parliament to explain the proposed concession scheme that will see KQ operate, maintain and develop JKIA according to the Privately Initiated Investment Proposal (PIIP) it submitted in December 2018.

KAA, which manages six airports and several airstrips, had outlined its own strategic expansion plan which would see the setting up of new aviation facilities across the country, plans that pundits argue may never take off under the struggling KQ.


Multiple sources that spoke to Sunday Nation in confidence owing to the high interests the proposal has generated pointed to various inconsistencies in the proposed takeover with several irregularities involved.

“KQ is insolvent. It will not add value to JKIA. If at all there is any intention for the public good, it should be KAA to run KQ. KQ problems will not be solved by having access to an already profitmaking airport. We all know the airline’s problems stem from irregular procurement procedures coupled with unsound business decisions,” said a source within the aviation industry.


JKIA is KAA’s single largest source of revenue with over 40 passenger airlines and 25 cargo airlines operating there which also makes it the busiest airport in East Africa.

In the PIIP, Kenya Airways PLC has proposed to form a special purpose vehicle (SPV) specifically dedicated to operating, managing and developing JKIA for a period of 30 years.

An SPV is a subsidiary of a company which is protected from the parent company’s financial risk.

SPVs were used by Kenya Airways to buy aircraft directly from manufacturers and then lease them to Kenya Airways (KQ) in what was alleged as an insider deal during the former managing director Titus Naikuni’s term.

Mr Naikuni has since denied knowing the names of the directors of two offshore companies incorporated by the airline’s lenders as part of a financing agreement to purchase 10 Embraer ERJ-190 from South America.

The firms — Samburu Limited and Amboseli Limited — based in Cayman Islands, remain transitory owners of the aircraft until the loans are fully paid to the lenders, another strategic blunder Kenya Airways is said to have clipped its own wings with. Proponents of the takeover say it is not new for the national carrier to run the airport as it has happened in many other countries, an argument Nandi South MP Alfred Keter vehemently dismissed.


“This is not a proper comparison. Ethiopian Airlines, Emirates and RwandAir are fully owned by governments, KQ is a private entity where the government is a minority shareholder. Both Ethiopian and Emirates were solvent when they were given privileges to ran their home airports,” Mr Keter said.

Although the government now owns significant shares in KQ after the recent debt restructuring plan, pundits believe there is some hidden influence elsewhere pushing KAA to handover JKIA to the airline.

The Treasury and 10 local banks were expected to control 87 per cent of KQ under the national carrier’s debt restructuring plan after it was agreed that the Sh44.2 billion loans would be converted to equity in November 2017.

KQ had proposed that the banks and the Treasury convert outstanding and unsecured loans into equity. Some banks opposed the move, sparking a court battle that ended at the Supreme Court before it was settled outside the court.

The bank’s stake at KQ has its own line of conspiracy theory. With their debt now standing at about Sh23 billion, mergers which have lately been taking place among the lenders are said to be gathering a different set of powerful ownership of the carrier, coupled with allegations of conflicting interest in the push for JKIA takeover.

The merger between the Commercial Bank of Africa and NIC Bank is said to be a scale changer in the ownership structure. The new entity which also set to acquire Jamii Bora Bank, which had agreed to have its dues settled by KQ gradually will be a major player with almost 25 per cent of the debt KQ owes banks under its belt.


“The group managing director of CBA is Isaac Awuondo. He is also the chairman of KAA. Now do your maths,” a source told Sunday Nation.

KQ also owes KAA close to Sh4 billion, adding to the absurdity of a debtor seeking to control a creditor.

There are also several lucrative contracts in the pipeline including the aborted Greenfields expansion which is said to be waiting for revival in the near future as well as the construction of JKIA’s second runway.

International partners are also said to be blowing their own set of pressure to take a slice of the airport. French firms who were said to have been outraged by the deal to expand the airport which was given to Chinese before it was suddenly revoked are said to have offered to build, operate and hand over the Terminal, after 30 years. The same period is what KQ is now seeking to run the airport through the SPV.

According Mr Keter, the move to take over JKIA is being pushed by powerful hands at the Ministry of Transport, explaining the inconsistencies in the plan which had seen KAA spend money to pay a consultant to advise it on the plan while at the same time engaging the public as if it had already decided on it.

“We are already losing money even before it starts. KQ is like a patient telling the doctor the prescription. This move is illegal, immoral and scandalous. It is just wrong,” Mr Keter said.