After Michael Joseph speech, Kenya Airways shareholders accept haircut

What you need to know:

  • Joseph told them that turning around the airline was much more complicated than running Safaricom
  • He spoke about the need to get the Kenya government to support the airline in which they had a significant investment in licensing decisions, and not to grant requests made by other presidents to have their airlines fly to Nairobi
  • Shareholders also wanted answers from the board on who was responsible for the state of the airline

On a cloudy August 7 morning, the day before the 2017 general elections, another vote took place at Embakasi in Nairobi.

Kenya Airways shareholders voted on a capital restructuring that effectively diluted their shareholding by up to 95 per cent in the short term.

The meeting, a shareholders Extraordinary General Meeting (EGM), started with 279 members present, with the number growing as more people cleared from the registration and gift area into the large tent where the meeting was.

Shortly after the start, Chairman Michael Joseph gave a speech imploring shareholders to follow the advice of the board, and unanimously vote in favour of the lengthy resolution, as it was the only solution that could keep the airline afloat.

As the meeting progressed into a question and answer session, shareholders seemed to have a lot of confidence in Mr Joseph, who has been on the board for just under a year and Chairman for six months.

While they were, as expected, angry about the decline of the airline and the erosion of its balance sheet by consecutive loss-years, they seem satisfied that he and Sebastian Mikosz, the new CEO, were the right people to turn the airline around.

INEVITABLE AND AVOIDABLE

But Joseph told them that turning around the airline was much more complicated than running Safaricom.

He spoke about the need to get the Kenya government to support the airline in which they had a significant investment in licensing decisions, and not to grant requests made by other presidents to have their airlines fly to Nairobi which they made whenever our President visited their countries, or to allow other airlines to fly their tourists directly to Mombasa. 

Mikosz spoke about social media posts that unfairly tagged the airline as being unreliable in time keeping and cancellations, which he monitors, and said that while inevitable and unavoidable, these issues were well within global aviation industry standards.

But shareholders understood some things clearly like dividends and corruption and pressed for more on these.

They are a pragmatic lot, and a few of them asked if the local Kenyan banks, which take money from depositors to lend to companies, had all agreed to convert their debts and become shareholders in the airline. 

Another asked that the airline not take its financial trouble to some banks where he had shares, which would cause those banks to also not pay out dividends to their shareholders.

UNFORTUNATE TIMING

Shareholders also wanted answers from the board on who was responsible for the state of the airline, and what action had been taken against employees mentioned in a forensic audit report that the board had commissioned.

To this, the Chairman said his job was to clean up the airline. He had not forgotten about the forensic audit report and had taken action and made some changes. But he said that he had to follow due process in staff matters, and lamented that the court process in Kenya moved very slowly in terms of dealing with corruption. 

Another shareholder asked if it was sinister that the meeting was taking place on August 7, to which the chairman replied that it was unfortunate timing that they had to meet a restructuring deadline just before most Kenyans would have been traveling to prepare for the general election the following day.

Finally, after a reading of the lengthy complex resolution about debt restructuring, bank loan conversion, non-cash considerations, and deferred shares in English, and a summary of the transaction in Swahili, shareholders unanimously voted for their haircut.