Senators now demand 10-year board minutes from troubled KQ

Senators probing the affairs of Kenya Airways are now demanding the airline’s board minutes since 2005 as they seek to understand how decisions that have nearly sank the airline were arrived at.

The minutes are anticipated to shed light for the first time on confidential dealings with the airline’s strategic partner KLM including why the now-controversial rapid acquisition of Dreamliners, dubbed ‘Project Mawingu’, was adopted.

KQ’s board had been asked to deliver the minutes by last Friday but failed, leading to the flop of a scheduled interrogation at Parliament Buildings yesterday.

Kisumu Senator Anyang Nyong’o said the investigating committee, of which he is chair, was disappointed with the non-delivery of the minutes as they were central to the probe.

“This committee only has one month left to wind up the probe... the minutes must be produced,” Prof Nyong’o said. The airline’s top officials, led by Chairman Evanson Mwaniki, had presented extracts from the minutes, which the senators refused to discuss.

REQUIRED DOCUMENTS

KQ has now been granted five more days to produce the said board minutes on a strict deadline of Monday next week, amid protests from the management that the time might not be sufficient.

Mr Mwaniki told the senators that his board had nothing to hide, promising to do everything possible to avail the trove of documents detailing deliberations of the members.

The senators had written to the airline demanding the board minutes 10 days ago hoping it was enough time for the directors to dig out the required documents.

Among the issues the Nyong’o’s committee is seeking to uncover is whether the giant European airline acted in the best interests of the Kenyan carrier in recent years when specific management decisions have been roundly blamed for the financial distress KQ is currently struggling with.

KLM took over the management of the airline nearly 20 years ago to help in turning around its fortunes, in an entry that preceded the listing of its shares at the Nairobi Securities Exchange.

 

The strategic partnership proved to be beneficial to the national carrier, as in multiple financial years reported profits and even paid dividends to shareholders including the Government of Kenya.

But huge financing costs linked to the fleet expansion with one of the world’s most expensive aircraft that are largely underutilised has sank the firm into losses, even wiping away its entire capital base at present. In the last financial year, KQ booked an after-tax loss of almost Sh26 billion, the largest ever by any corporate in the region.

Managers of the airline have previously admitted that the planes came faster than new routes were found, as the route expansion projections did not materialise as planned.

Delivery of the last two Dreamliner aircraft has been delayed following cash flow constraints while the State has been forced to inject new capital to keep the company afloat.

An estimated Sh60 billion in fresh capital would be needed to revive the company, according to estimates from the National Treasury,  funds that could be raised through a rights issue. Already, the State has granted about Sh4.2 billion in a new credit facility to KQ, which could be converted to equity.

LEASE NEGOTIATIONS

The airline’s biggest lender, the International Finance Corporation has also demanded a seat on the board, reportedly because it was unhappy with the operations of the firm under the leadership of the board as it is constituted, National Treasury Cabinet Secretary Henry Rotich told the Nyong’o committee.

In the latest turn of events, KQ was in aircraft lease negotiations with a Pakistani airline in a stop-gap measure to generate revenues from its otherwise idle fleet.

The impeding change in management and possible recruitment of another strategic investor has seen the airline share recover from record low prices that followed the release of the financial results.