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State will not sell KQ stake, says Transport CS James Macharia

By Roselyne Obala | June 17th 2016

Brussels, Belgium: The Government says it will not offload its 29 per cent stake in Kenya Airways for now.

Transport and Infrastructure Cabinet Secretary James Macharia said some investors have expressed interest to buy the troubled airline but they are yet to firm up any commitments.

He said the Government’s plan is to resuscitate the ailing national carrier that is in dire need of Sh60 billion to clean its balance sheet.

“We have many proposals from Middle East and American companies but expression of interest is different from actual buying. What we are looking for is the best interest not just for the airline but the country as well,” said Macharia.

The CS who addressed the media in Brussels, Belgium where he accompanied President Uhuru Kenyatta to sign infrastructure deals with the European Union (EU) affirmed that the government’s interest is to save the airline from collapse.

“Selling the shares is important but not a priority for now. What is important now is to restore the financial viability of the airline,” stated the CS in reference to restoring the fortunes of the national carrier. He said due to the firm’s financial troubles, the management resorted to the sale of London slot due to liquidity issues and sub-leasing some of its large aircraft. The airline is also trimming down its workforce to ensure it has a profitable business model before embarking on its expansion.

“At the end of the day, we are more focused on ensuring that the balance sheet is in good shape, and then we can now go back and negotiate. We want to make sure we get the best deal in terms of anyone wanting to invest in the airline,” he stressed.

“There are many restructuring processes ongoing, which are complex but we shall be announcing the developments very soon.”

According to Macharia, KQ is very a strategic institution for the country. He argued that a lot still needs to be done to enable the airline restore its lost glory. The recovery requires Sh60 billion, which the Government maintains must be shouldered by all shareholders, including partners KLM and Air France.

Last year, the Government allocated the airline Sh4.2 billion. “We could not factor in bailout terms in the finance Bill. KQ is strategic to the country but a private investment,” explained Macharia.

He said the Government will hold discussions with the Board of Directors to find ways of helping the airline raise money to restore its financial viability. “We have come from very far, if you look at the kind of things that happened and what we have done, we have trimmed down expenses to cut debts,” Macharia said.

US direct flights

He added, “We are also changing management at all levels. You have seen us ask managers from the senior levels to leave and this will be restoring capacity in terms of management.”

On the fate of Chief Executive Officer Mbuvi Ngunze, the CS remained non-committal, only saying, “This is not a matter that can be discussed presently, but we are reviewing the entire structure of management to ensure we have the best people running the airline.”

Macharia disclosed that Kenya is awaiting the outcome of an audit report by USA to firm up the deal to have direct flights to the US.

“A final audit done last week by the Federal Aviation Authority of the US is very crucial. The Transport Authority of the US had visited earlier and during that visit Kenya scored 88 per cent, which was way above the pass rate of 75 per cent,” he noted.

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