Will Kenya Airways (KQ) weather the storm and bounce back to success if the management gaps cited in the Senate investigative report are addressed? Kenyans will be required to pump in Sh70billion to save the national carrier from going under and retrace its path to profitability. To solve the current fiscal crisis in KQ, there can only be three options—dissolution of the company; recapitalisation of the company through a Rights Issue; or bringing on board additional stakeholders or sale of the government’s 29 per cent share. But these far-reaching recommendations by the Senate following its adoption of the Select Committee inquiring into the affairs of KQ report, requires unquestionable political will to hold those responsible accountable. The senate report exposes deep-rooted syndicates that milked KQ’s finances dry, leading to the sorry state of affairs.
For instance, the management acquired aircraft that were not suitable for African routes; an example is the acquisition of 26 Embraer aircraft, 15 of which are always on standby.
The Embraer aircraft have a capacity of 90 passengers but experts have stated that it can comfortably carry only 65 passengers. Kenya Airlines Pilots Association (KALPA) informed the Senators that they suspect that there was a possibility of fraudulent procurement processes within the company, which encouraged overpricing of goods and services well beyond the prevailing market rate. The flopped expansion project dubbed Project Mawingu aimed at fleet expansion and modernisation has also been questioned. Under the programme, KQ anticipated that by 2020, it would run a fleet of over 100 modern aircrafts. “Aircrafts are very expensive acquisitions and thus KQ could not approach Boeing directly. Therefore, KQ used lease purchasing (through offshore companies) and leasing,” reads the report. Going by the figures in the report in March 2011, KQ was a profitable company since it had declared a Sh5 billion profit and was in a solid financial state.