Yes, MPs right to query, stall KQ's planned takeover of JKIA

Kenya Airport Authority (KAA) Chief Executive Officer Jonny Andersen (right), Corporation Secretary Katherine Kisila (left) and General Manager Finance Alex Gitari when they appeared before the National Assembly Public Investment Committee in the ongoing probe on the controversial proposal for Kenya Airways to run Jomo Kenyatta International Airport at Parliament Buildings last week. [Boniface Okendo, Standard]

The planned takeover of Jomo Kenyatta International Airport by struggling national carrier Kenya Airways was thrown into further controversy last week after Kenya Airports Authority MD Jonny Andersen bizarrely admitted that he had only received a letter from PSs Paul Maringa and Esther Koimett advising him about the new developments.

It got even more absurd when Mr Andersen admitted that KAA – the operator of all the country’s airports- did not even initiate the takeover bid nor had he seen a Cabinet Memo authorizing the same. Ideally, such a planned takeover of a vital national resource is sanctioned at Cabinet level.  And there are numerous complex steps to be taken before the bid is finalized.

There has been widespread concern since the bid/merger was made public with key stakeholders expressing discomfort at what really looks like a bad deal. In any case, there has been little information about the impact of the bid to critical stakeholders like employees, other airlines operating from JKIA and most importantly, the public who hold a substantive stake in both entities.

In the deal, KQ will operate, maintain and develop JKIA under a Privately Initiated Investment Proposal (PIIP). And even though KQ has proposed to have a Special Purpose Vehicle to run JKIA, obviously so as not to imperil KAA, ghosts from the past about a similar venture come to mind.

Airports are national assets, ceding its total ownership to private entities is not smart. JKIA is strategically positioned as an aviation hub. So the question is: What would happen to other airlines using the facility? Is the merger being done for a good reason- businesswise and in the national interest?

Most importantly, KQ is not yet out of financial doldrums. Would that it were KAA taking over KQ. KAA is a going concern with a very strong balance sheet. It would bring on the table much needed capital injection.  KAA’s strengths is KQ’s handicap. JKIA contributes 40 per cent of KAA’s income with at least 60 airlines, 300 tax free shops, office space and warehouses parking slots forming a huge bulk of the businesses. On the other hand, last year, KQ made a Sh4 billion loss. It has a Sh23 billion debt hole- Sh4 billion of this is owed to KAA. It is a conundrum of sorts.

In short, KQ lacks the capital necessary to make the takeover of East Africa’s busiest airport viable or of compelling business sense.

It could be argued that the acquisition is meant to cure KQ’s cash flow problems given its huge debts only that it involves a national resource.  

It was thus wise for Parliament’s Public Investment Committee to invite the Auditor General to carry out a forensic audit on the proposal.

For now, this newspaper wants the deal cancelled