The usual critics were very quick to right off KQ and some even wishing it goes down so that they can make more noise and point fingers everywhere. KQ is soaring back to it former glory and from there on outer space will be the only limit.
Good news. Now KQ should buy those dreamliners again. But will we still be required to leave our iPads and give up our social media accounts to US officials when going to Trumpistan?
Ironically yes in the long ran they need the dreamliners and 777 after they reconstitute their balance sheet, pay of debt and start making profit. Going to the usa is a hustle that i don’t want. Nyinyi ngangana.
Same haven’t been to the states but been all over europe and china but next year will have to go for a wedding but this plus the wedding being in July so e3 maybe?[ATTACH]104416[/ATTACH] But probably end up in europe.I just never like the states too many levels to their shit
Tourism is bound to reclaim it’s lost glory because of this move and the sgr. Coast hotels should lower their charges to encourage local /domestic tourism as movements have been made easier by the Sgr. Considering that for the first one week it has ferried 7000,the number is likely to increase especially during the December holidays if all things remain constant. Simple calculations on the lower side 7000*700=4.9.This is just passengers, let’s wait for the cargo. It’s a plus for this country. Good take off
KQ is a dead horse. I am a Jubilee supporter, but politics aside, this company has costed the taxpayer more problems than value. A major shareholder in KQ i.e KLM is also its competitor. KLM sells more tickets out of east africa than Kenya airways…because it redirects Kenya Airways traffic to its business.
How much alone does KQ contribute to our economy. KQ is the anchor carrier of JKIA, without it, JKIA wouldn’t be a hub and all those people directly and indirectly depend on the airport to do business and work. If JKIA wasnt a hub none of the current big carriers woukd be interested in flying here. Look at Entebbe and Dar airport which are largely under utilized. KQ being here means we don’t have to transit in Joburg, addis or Cairo to fly out of the continent or within Africa. KQ has better connections but abit pricey. Others are cheaper but you have to spend more money and time on transit in their hub countries to connect. The 15 years that KQ was profitable, the government earned billions in dividend that really make the amount it pumped to KQ look very small. Lastly the taxes KQ pays Treasury every year whether it makes a profit makes it unthinkable that someone would consider letting it collapse.
Your reasoning has no business foundation…just politics. You should look at KQ from an investor’s perspective, not from a politician’s perspective. A delve into KQ’s books reveals the horror and rot within the company. The parasitic arrangement it has with KLM (its competitor and major shareholder) leaves it hostage. Unless the government gets veto power by owning over 50% of the airline and revoking all bad arrangements with KLM, KQ is a bad business so far. I just saw an article in wazua, and I will post it here as it is, so you can get a clearer picture.
"Some Kenya Airways workers believe KLM routinely takes traffic that belongs to the Kenyan carrier.
However, this allegation has been dismissed by the Seabury report as a misconception since “if desired”, KQ could block KLM’s expansion in Eastern Africa through joint network governance.
The argument within KLM is that if it reduces service to Eastern Africa, a new competitor might come in and take the route and so it is defending the Eastern Africa route for KQ against an onslaught from Gulf airlines, including Etihad, Emirates and Qatar.
Initially, KQ’s regional and domestic operations were to be structured to feed both KLM and KQ’s intercontinental operations with a provision of seamless connectivity.
Kenya Airways was to take over the operations of “most of” KLM tail-end services via Nairobi and its European network was to be adjusted to optimise hub-to-hub operations.
It also meant that KLM’s Eastern Africa destinations, served via Nairobi, such as Lilongwe and Dar-es-Salaam, were to be taken over by KQ. This did not happen.
Secondary destinations in northern, central, eastern and western Europe were to be served by KQ via KLM Amsterdam connections, “subject to a detailed analysis of the business benefits of each pair”.
Both KLM and KQ agreed to offer competitive fares reflecting their connecting services.
But even with that, questions have been raised within Kenya Airways as to why KLM sells more out-of-East Africa tickets than KQ.
It is now known that KLM does not make any efforts to sell KQ tickets while KQ makes efforts to sell both its tickets and KLM’s.
The winner here remains KLM, which rakes in more revenue from Eastern Africa than KQ.
“This imbalance is indicative of a sales relationship in need of improvement,” says the Seabury report.
Another loss for the country is that the government agreed to ban charter flights to and from Jomo Kenyatta International airport to safeguard KQ.
The import of this clause was that tour companies could not fly tourists on their choice airline. The winner for this arrangement was KLM since it commands the north-south route.
Again, while KLM had agreed to respect “grandfather rights” to existing route licences, new information is that it has been selling these slots.
“Kenya Airways has sold its highly valuable slots into London Heathrow Airport, and proceeded to lease some unfavourable slots from KLM,” says Kenya Airline Pilots Association Secretary-General Paul Gichinga.
NO UNDERSTANDING
In the aviation industry, grandfather rights allow an airline to keep a slot in perpetuity, provided that it uses it for at least 80 per cent of occasions during a single season.
Without these grandfather rights, or slots, an airline is unable to expand to major international airports. KQ has sold its slots at Heathrow.
The 1996 agreement also said that the business will be conducted “in the best interest of the company on sound commercial profit making principles”.
Despite this cooperation, the two airlines agreed to “remain competitors in certain spheres of business” and to establish a code of conduct governing their behaviour in areas where they remained competitors”.
Now, officials from both firms agree that KLM dominates working group discussions and that KQ has no say.
“KLM feels that it dominates only because KQ does not put in similar effort,” says the Seabury report. “It does not prepare for meetings and frequently does not have proper background for their positions.”
One of the recommendations given by the consultants is that KLM needs to take time to explain sophisticated issues to KQ so as to “stay transparent and include KQ input in all steps of decisions”.
KQ was also asked to assign “top talent” into the working groups and resources. This is because KQ employees have a general lack of understanding on how the joint venture operates and how to cooperate at day-to-day levels." (Article Originally posted in the Daily Nation and written by one John Kamau)
Let’s use common sense then. So your solution is we let KQ collapse so that KLM doesn’t benefit at all from it!!!
Yes during privatization of KQ during Moi era KQ had collapsed and KLM took advantage of Nyayo KANU desperation to impose those conditions. However KQ new Chairman said he had studied the agreement and talked to Air France/KLM group CEO to see how it can be amended so that both carriers can benefit mutually. The good think about Treasury bailing out KQ is that all those funds didn’t go to waste. It saved KQ and it has now been converted to Equity shares. That means Treasury is now the biggest shareholder of KQ and Air France/KLM the minority. All other debtors agreed to convert their loans to equity and were given shares. That has saved KQ in the short term and restored confidence in its future operations. In the next board meeting the reconstituted shareholding will be published and Air France/KLM shareholding continues to shrink.
That’s is why I prefer boards whose membership have decades of successful management experience in many ventures. Such rush, knee jerking, reactionary decision like let it collapse have no hearing there. Look at UG and Tz who let their airlines collapse and have struggled to revive them with millions of $ unsuccessfully.
Again, you did not read my comment. I suggested majority ownership by the government as the best option. Not dissolution of the company. Please read the entire comment before responding. Then, you can argue from a point of knowledge. Until the government owns 50%+1 shares of KQ, only then can it save KQ from the parasitic relationship it has with KLM because it will have veto power on all decisions. There is nothing like mutual benefits between competitors who operate on the same routes in a free market. Again, read that article before commenting to have a better grasp on issues.
Explain to me how as an investor you will gain anything from KQ if it performs poorly.
Your argument is also skewed. KQ Chairman Michael Joseph said himself their are mutual benefits in the partnership and others that need to be renegotiated. Example is its prime landing rights they gave KQ to fly to Heathrow terminal 5, Paris and Netherlands. Not many African carriers have this rights. They usually fly to Gatwick and other second rated airports in those cities. They are also give time slots that make it unattractive to connect to other flights. Even in Hongkong they got a right through sky alliance to land there, pick passengers and fly onwards to Bangkok. Most African flights are allowed only to drop passengers and leave.
That’s why I still insist let’s work around this challenges mutually and overcome them. Treasury can easily get 10% more voting rights at the AGM or board if they just tap Chris Kirubi votes to get 51% votes. At that time they need a new airline willing to back them with more resources and an already agreed buyout plan with Air France/KLM for smooth transition. Just throwing up boardroom wars is juvenile in such high level stakes. Everyone in that room are supposed to rebuild and grow.
Nobody said investors will gain if KQ performs poorly. That is a product of your fertile imagination.
You are reasoning like a politician. Taking the MDs word for it without checking underlying issues. KQ and KLM are COMPETITORS first, and business partners second. Until you get this point, it is futile trying to explain further.
The only way to save KQ is total control by the government via 50%+1 ownership. Only then can it renegotiate better terms with KLM to end that parasitic relationship. That is the ONLY way out. Until then, the cycle of poor performance and bailouts will continue because KLM will keep reaping big from their lope-sided arrangement
No. 2. Is also reasoning with fertile imagination. Learn to accept that its normal for others to have a different view from your own and not everyone thinks throwing away the baby because its sick is a solution.
To buyout Air France/KLM by Treasury will need over $ 10 billion before negotiations. As an investor do you have that finance?
Now that KQ will be free of the alliance what next, back to Gatwick and other secondary airports. Our EU clients will flee to other airline.
If you think business partnerships is just win win all the time just go it alone, mature decisions is what builds business at this level not rushed decisions.
Yes, I have full and unresolved confidence in Michael Joseph as KQ Chair. It doesn’t mean the maths is concealed somewhere. As a public limited company that is shared every quarter. He is the steady hand that will refinance the balance sheet, repay the debt and bring back the airline to profitability. The journey is nealy halfway there and the new Polish CEO will gladly find that turnaround almost sorted.
Going forward, renegotiate the contracts terms and await to see if Air France/KLM will take part in the debt/share swap in the next two months. If yes that means they will put billions into KQ, if not their shareholding will reduces again significantly. KQ and Treasury can then look at rival bids for KQ to see if they can finance its full takeover and still have better or equal landing right as with KLM in Europe and alliance.
Why are you imagining your own things? I said that the government should increase its shareholding to save KQ, so wherever you are getting this is beyond me. You seem to think that I support closing down of KQ, and that is not the case. I have already explained it.
National carrier Kenya Airways has prepared a delicate recovery plan that will see 11 commercial banks it owes Sh22.8 billion jointly replace Dutch airline KLM as the second largest shareholder after the National Treasury. Kenya Airways, which is popularly known as KQ, says in a circular sent to shareholders ahead of a special general meeting that the lenders, including Equity , KCB Group and Co-operative Bank have formed a special purpose vehicle — the KQ Lenders Company Limited — through which they will own 35.7 per cent of the national carrier. KQ borrowed unsecured short-term loans from the banks to meet its daily obligations, including payment of salaries during its most turbulent times.
The national government, the single largest shareholder that the carrier owes Sh27.2 billion (inclusive of accrued interest), is also converting the debt into shares, a move that is set to increase its stake in the airline to 46.5 per cent from the current 29.8 per cent. The two share swaps — by the banks and the Treasury — have a 95 per cent dilutive effect on all existing shareholders. KLM, a KQ joint venture partner and shareholder, is taking the biggest cut in terms of actual valuation of its stake which is nearly halving to 13.7 per cent from the current 26.7 per cent despite the Dutch carrier injecting Sh7.9 billion in cash and in-kind to the airline’s recovery effort. KQ employees with outstanding performance records are also being offered 1.9 per cent shares, making them the company’s fourth largest shareholders. Mbuvi Ngunze, KQ’s former managing director and restructuring adviser, said the banks will have the option of divesting from the airline over a 10-year period by selling their stake on the stock market or to a strategic investor.
“The Treasury will have two seats in the KQ board, KLM will appoint another while the banks shall also have one director, as long as they own at least five per cent of the shares,” he said.
This new shareholding structure is contained in a comprehensive shareholder circular prepared by a team of consultants, including PTJ Partners (restructuring adviser), White & Case (international counsel), Coulson Harney (local legal advisers) and Deloitte (independent financial adviser). Shareholders have been invited to an extraordinary general meeting (EGM) on August 7 to approve the proposed changes. The recovery plan seeks to offer the airline “cash-flow relief” of Sh37 billion over a period of five years and reduce gross debt exposure — aircraft, bank and government debt as well as future lease payments — by between Sh51 billion to Sh191 billion. Its ultimate goal is to leave KQ in a positive equity position of Sh8.9 billion from the current negative Sh44.9 billion.
If the plan is approved, the 70,000 Kenya Airways’ retail shareholders will be left with a tiny 1.24 per cent of the national carrier, down from 24 per cent — making them the biggest losers in the transaction.
The investors will, however, be invited to participate in a Sh1.5 billion “open offer” to reduce the dilutive effect before the year ends. KLM has shielded itself from the possible deeper erosion of its stake in the troubled airline by making a multi-billion shilling cash injection and transfer of one London Heathrow airport landing slot to Kenya Airways (which currently leases them) in exchange for shares. The Dutch carrier will also get more equity in lieu of payments due from KQ for an IT system installation and support services it has rendered the Kenyan carrier. These two “in-kind” transactions are valued at Sh2.7 billion. “The debts being turned into equity were so significant such that KLM would have had to inject over Sh15 billion to retain its original stake,” said Mr Mbuvi. The Treasury, which is not injecting fresh funds into KQ, has guaranteed KQ $750 million in local and international loans in exchange of several concessions from the lenders. Under the shareholder structure, the 11 Kenyan banks will offer Sh18.1 billion in new credit to KQ to “principally secure aircraft engines refurbishment. A few banks are yet to sign the plan, according to the circular. The recovery plan says the local lenders, as well as the Treasury have three options to safeguard their interests. They can either individually convert their debt into ordinary shares, convert a portion of it for a convertible bond or join forces under the special purpose vehicle.
“If any Kenyan bank or the government fails to exercise its option in relation to the above by the date of launch of the restructuring, it shall be deemed to have opted for option the first option above,” the circular says.
KQ chairman Michael Joseph has informed shareholders that there is no funding alternative to rescue the airline and that failure to implement the plan will see the business “enter into formal insolvency” and delist from the Mr Joseph has, through the circular, requested shareholders to approve the plan, adding that it is in the best long-term interests of the company. However, the EGM is a mere formality. “Shareholders representing over 56 per cent of the issued and outstanding ordinary shares have indicated their intention to vote in favour of the resolutions at the EGM,” said Mr Joseph.