Senate picks team to probe troubled Kenya Airways

Corporate News

KQ chief executive officer Mbuvi Ngunze (left) and group finance director Alex Mbugua during the release of the airline’s financial results. PHOTO | SALATON NJAU 

By EDWIN MUTAI, emutai@ke.nationmedia.com

In Summary

• A select committee of the Senate will conduct its investigations on the challenges facing KQ within three months and make recommendations to salvage the loss-making company.
• The committee will among other things investigate the leasing and buying of aircraft since 1996 and the role of the alleged off-shore companies in the investment affairs of KQ.
• The committee will also be expected to unmask individuals behind the alleged off-shore companies and their relationship with the management of Kenya Airways.

A select committee of the Senate has been set up to probe the woes affecting loss-making national carrier, Kenya Airways.

The Senate said unless drastic measures are taken to save KQ, the company will collapse soon.   

The government has already stepped in to save the national carrier by advancing a soft loan of Sh4.5 billion. The government has 29.8 per cent shareholding in the airline.

KQ made a net loss of Sh10.5 billion in the half-year ended September, reversing a net a profit of Sh384 million reported a year earlier.

The national carrier’s earnings were affected by slow growth in passenger numbers in the wake of heavy investment in new aircraft. It handled 2.1 million passengers over the period—an 8.2 per cent increase from 1.94 million last year.

KQ is yet to release its full-year to March 2015 results, but a profit warning issued in November 2014 means it is expected to report a loss of at least Sh4.3 billion.

Last year, the airline hired a financial adviser to help restructure its debt with the specific brief to renegotiate maturity periods of loans to cut the short-term obligation strain on cash flows.

Members of the select committee that will investigate “the Pride of Africa” are Anyang’ Nyong’o (Kisumu), Mutahi Kagwe (Nyeri), Peter Mositet (Kajiado), Wilfred Lesan (Bomet), Billow Kerrow (Mandera), Daniel Karaba (Kirinyaga), Boni Khalwale (Kakamega), Hassan Omar (Mombasa), Agnes Zani (nominated), James Orengo (Siaya) and Naisula Lesuuda (nominated).

READ: Kenya Airways gets Sh4.2 billion Treasury bailout

The team is expected to conduct its investigations on the challenges facing KQ within three months and make recommendations to salvage the loss-making company.

The committee will among other things investigate the leasing and buying of aircraft since 1996 and the role of the alleged off-shore companies in the investment affairs of KQ.

The committee will also be expected to unmask individuals behind the alleged off-shore companies and their relationship with the management of Kenya Airways.

The team will look at the employment policies and practices of personnel including engineers, pilots, cabin crew and ground personnel.

Further, the committee that will be chaired by Prof Nyong’o will establish reasons for delays and cancellation of flights, their frequencies and magnitude of losses.

Initiating debate on the motion for the establishment of the probe committee, Prof Nyong’o said Kenya Airways’ debt now stands at Sh80 billion. He said the carrier had lost its market within the region to competitors— Ethiopia Airlines and Rwanda Air.