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Government to probe KQ over mega loss ahead of Sh. 60 billion bailout bid

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The National Treasury will scrutinise Kenya Airways before any bailout plan is put in place after it emerged the firm will require Sh60 billion to bring it back to profitability.

The airline has sought the services of both Mackinsey and Seabury auditing firms to help it emerge from the Sh25.7 billion loss-making position.

Cabinet Secretary Henry Rotich Sunday said in an interview that the Treasury was keen to find out how the national carrier incurred such a huge loss announced last week before considering a bailout.

“We are seeking to understand what exactly led to the massive losses and what intervention is needed to turn around the airline’s financials. We won’t just inject funds before we understand the situation,” said Mr Rotich.

The minister said the exact figure to revive the airline would be determined by both the contracted auditors and the Treasury’s scrutiny.

The ministry will investigate the airline over its cost structures, including leases, fuel purchasing plans and staff remuneration.

“We are also going to review our level of involvement with the board.

“It will be important to know why there was no government voice when things were turning wild and see how to improve on such issues.

“Even the management will be scrutinised to see any areas where they did not act right.

“Any neglect will definitely lead to an overhaul,” said Mr Rotich.

KQ’s costs went up by Sh5 billion after a fuel hedging plan went bad. This followed a fall in fuel prices in the last half of 2014 and the first half of 2015.

The airline has since secured a Sh20 billion bridge financing from Afrexim Bank to sustain its operations in the interim as it struggles with a cumulative debt of Sh130 billion.

The CS spoke as a section of civil society called for thorough investigations before any plans are rolled out to bail out the loss-making national carrier.

According to the National Civil Society Congress (NCSC), former and current managers should be questioned to shed light on how the airline incurred the loss.

The activists, led by NCSC President Maurice Odhiambo, said such a huge loss could only happen because of corruption.

“We need to be told what happened before the Treasury makes any plans to bail out Kenya Airways.

“We need to know the truth. Should anyone be found guilty of any wrongdoing, they should be taken to court and ordered to refund the money,” Mr Odhiambo said yesterday during a press briefing in Nairobi.

Earlier in Mombasa, Mr Rotich said the report by the two auditing firms would be ready in 60 days, adding that both the national airline’s management and the Treasury would heavily rely on the experts’ plan to make the firm realise profits.

He said the environment under which KQ has been operating is “very challenging” but with a solid plan, the firm would be turned around.

On Thursday night, KQ Chief Executive Officer Mbuvi Ngunze maintained that the airline is committed to improving its performance.

“The airline is in the market to make sales, therefore, we must constantly deliver the revenue and boost its cash flow,” he told NTV.

He said there was need to replace the old aircraft with Dreamliners amid competition from Middle East carriers.

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