JKIA takeover not merger but partnership deal — KQ

MPs yesterday disagreed on whether to stop Kenya Airways’ plan to take over management of Jomo Kenyatta International Airport.

Members of the Public Investments Committee and the Transport committee clashed over the planned takeover.

Kenya Airlines CEO Sebastian Mikosz defended the airline’s plan, saying the aim is to improve JKIA and increase Kenya’s market share in the East Africa.

“An analysis of the market showed we have little under our control. It is obvious to us as an airline that we need to increase our market share by putting our assets together,” he said.

Mikosz said the main objective of the bid to run JKIA is to position Kenya ahead of its competitors — whom he said are more organised.

“We decided to copy the effective competitors as is the case of Ethiopia, the Gulf carriers — Fly Emirates, and Rwanda,” the KQ boss said.

He explained that according to the plan, KQ will not be buying or merging with JKIA but will run it under Public Private Partnership deal. “It is to have a concession operator agreement, which means that the building and all the land will remain owned by KAA and ultimately owned by the government,” he KQ boss said.

Read: MPs stop JKIA takeover, say deal suspicious

He added, “The merger or acquisition is not applicable, it is a system where we want to create a holding where all the assets can finance each other and are aligned for growth.”

During the session, PIC ordered a stop into further negotiations between the airline and Kenya Airports Authority. The Transport committee declined to call a halt.

Transport committee chairman David Pkosing declined a request by Mathira MP Rigathi Gachagua that the negotiations be stopped until the committee completes probe.

Other members, Jaldesa Rehema of Isiolo and John Naicca of Mumias West, also wanted the takeover negotiations stopped as “Kenya Airways can’t be compared with African airlines.”

In his decision, the Pokot South MP instead asked the concerned agencies to give the committee two weeks to study the KQ proposal, said to be confidential.

PIC was to engage Transport PS Paul Maringa but he did not turn up. The committee chaired by Mvita MP Abdulswamad Nassir will table the matter before the House today to find a way forward.

The probe followed a proposal by KQ to take over JKIA for 30 years by creating a special purpose vehicle to run the airport in a public-private partnership agreement.

More: JKIA takeover: MPs link Kenyatta family

The clashing views of the two committees raised questions whether Parliament will be able to sort out the issues. Many Kenyans fear they will lose billions in revenue.

The concern is that Kenya Airways is a loss-making entity, hence, not a viable option. The takeover was mooted in a Cabinet resolution which PS Maringa communicated to KQ and KAA.

Transport PS Esther Koimet, who led the team, told the committee to consider that what KQ is planning is still a proposal, hence, should not raise fears.

The PS said shareholding in KQ will be factored into the decision, citing a possibility of paying off the banks to shed shares.

However, this would mean the government will have to settle Sh23 billion owed to 10 banks — grounds for which they formed a company called KQ Lenders 2017 Ltd.

The company, which controls 38 per cent shares, has two slots in the Kenya Airways board. That’s where the question of conflict of interest arises.

The government has 48 per cent shareholding, KLM has 7.8 per cent, minority 2.8 per cent. KQ employees have a 2.4 per cent share.

CEO Jonny Andersen acknowledged that the matter must be handled sensitively as “it is not about KAA but Kenyans.”

The authority hired MMC Africa at Sh150 million to steer the negotiations. “Since we are losing market share, we must think of a way to have a viable aviation sector to stop further loss of market share,” Andersen said.

Gatundu South MP Moses Kuria asked the airports authority to document gaps in the proposal for the committee’s review.

Mwingi Central MP Gideon Mulyungi described the link between KAA and KQ as a “forced marriage of parties holding brief for the transport ministry.”

His Tarbaj counterpart Ahmed Bashane pushed for KAA to come up with its proposal on how to improve operations at JKIA.