Why KQ is itching to get its hands on JKIA
National carrier Kenya Airways is grappling with a Sh220 billion debt and needs a government bailout to compete favourably with foreign airlines flying into Nairobi, a confidential report recently tabled in the Cabinet shows.
The document, titled Project Simba Memorandum and dated February 20, paints a desperate picture of an airline, which has no cash flow buffer and whose level of revenue does not allow it to generate positive cash flow.
“Kenya Airways board and management wish to warn that without immediate remedial action, the company may revert to technical insolvency,” notes the document.
Sources say the report was first handed to President Kenyatta, who then asked Transport Cabinet Secretary James Macharia to rework it as a Cabinet paper.
It was this Cabinet paper that approved the running of Jomo Kenyatta International Airport by Kenya Airways (JKIA), abbreviated as KQ, much to the chagrin of the Kenya Airports Authority (KAA) and the aviation workers’ union.
“Insolvency of the airline will result in the immediate repossession of aircraft and engines by lessors and trigger the $750 million (Sh74 billion) government guarantee in place on behalf of Kenya Airways,” notes the document.
The government issued a sovereign guarantee to local banks that turned their debt into equity, and in the event of KQ’s collapse, they could cash $750 million (Sh75 billion).
Among the proposals given to save the troubled airline is the government buyout of its foreign partner KLM, banks whose debts were turned into equity, and minority shareholders.
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SOURCE: Daily Nation