Kenya Airways (KQ) has once again called on the government to enforce the “Fly Kenya Policy,” a provision designed to give the national carrier priority in air travel for government officials. This policy, introduced in 2016, was aimed at ensuring that all government ministries, departments, and agencies utilize Kenya Airways whenever they fly, as laid out in the Public Procurement and Asset Disposal Act. However, despite being in place for several years, adherence to the policy remains low, with only about 30 percent compliance. This lack of enforcement, coupled with the practices of some travel agents inflating prices, has led to Kenya Airways facing significant challenges in gaining full benefits from the initiative.
Speaking before the Senate Transport Committee, Kenya Airways CEO Allan Kilavuka stressed the importance of the government stepping up enforcement mechanisms. He argued that the airline’s current position should see it as the primary choice for government-related travel. However, without proper implementation of the Fly Kenya Policy, many government officials opt for other carriers, often citing lower prices as the primary reason. Kilavuka acknowledged that Kenya Airways tickets might sometimes be higher, but he also attributed the situation to additional costs that intermediaries like travel agents often add.
In his presentation, Kilavuka emphasized that Kenya Airways is not just asking for preferential treatment for the sake of it but rather to ensure the airline’s sustainability and future competitiveness. He also mentioned that the airline has made significant efforts to expand its operations and enhance its service offerings. For instance, Kenya Airways is looking to develop capabilities in engine repair and overhaul, not just for its own fleet but also for other airlines. In order to support these plans, Kilavuka called for the establishment of a Special Economic Zone (SEZ) at Jomo Kenyatta International Airport (JKIA). This SEZ would provide tax and non-tax benefits to attract partnerships that are crucial for Kenya Airways’ ambitions in aircraft maintenance.
Kilavuka revealed that the airline has already written to the National Treasury to register certain activities at JKIA under this SEZ plan. He also noted that in the future, this could be extended to other airports, including Moi International Airport in Mombasa, Kisumu International Airport, and the Pride Centre in Embakasi. By establishing these zones, Kenya Airways aims to position itself as a leader in the highly specialized field of aircraft engine repair, a sector that holds immense potential for revenue generation.
While Kilavuka outlined ambitious plans for the future, he was also candid about the challenges the airline continues to face. One of the major obstacles Kenya Airways is grappling with is the issue of Value Added Tax (VAT) refunds. As of August 2024, the government owes the airline VAT refunds totaling Sh2.7 billion. The airline has been pushing for these refunds to be processed to help ease its financial burden. Additionally, Kenya Airways is struggling to collect Sh840 million owed by various state agencies, a situation that has further exacerbated the airline’s cash flow problems.
Kilavuka did not stop there in listing the airline’s financial woes. He revealed that Kenya Airways also has Sh1.4 billion stuck in several African countries, including Nigeria, Malawi, Ethiopia, and Burundi. This money, which the airline is unable to repatriate due to foreign exchange controls in these countries, has added to its financial strain. Kilavuka urged the government to intervene in these matters, particularly by negotiating with the respective governments to allow the release of the funds.
The issue of reciprocity in Air Service Agreements (ASAs) was another point of contention raised by Kilavuka. He argued that Kenya Airways is at a disadvantage when other countries do not fully honor their agreements, while Kenyan carriers are expected to adhere strictly to the terms. To remedy this, Kilavuka called for stronger enforcement of these agreements to ensure a level playing field for all airlines involved.
During the session, an exchange between Kilavuka and Nandi Senator Samson Cherargei sparked controversy. Cherargei accused Kenya Airways of misleading the public about its financial situation, suggesting that the airline was not as financially troubled as it claimed to be. Kilavuka vehemently denied the accusation, pointing out that while Kenya Airways has made some profits, these are overshadowed by the airline’s substantial liabilities. Kilavuka urged the senator to withdraw his statement, noting that such allegations could harm the airline’s reputation and erode customer confidence.
Cherargei, in turn, sought more detailed information about Kenya Airways’ fleet. Kilavuka responded that the airline currently operates 43 aircraft, with 25 of these being leased, while the remaining 18 are either owned outright or under finance lease agreements. This clarification helped shed light on the airline’s asset structure and the financial commitments it has undertaken in terms of fleet management.
In terms of financial support, the Kenyan government has provided substantial assistance to Kenya Airways in recent years. Since March 2020, the government has extended shareholder loans totaling Sh25 billion to help the airline navigate the challenges brought on by the COVID-19 pandemic and other economic pressures. These loans have been critical in keeping the airline afloat during turbulent times. However, Kilavuka pointed out that more needs to be done to secure the airline’s long-term viability.
One of the key requests made by Kilavuka was for the Kenya Airports Authority (KAA) to prioritize Kenya Airways at JKIA. Specifically, he asked that Terminal 1A be dedicated exclusively to Kenya Airways. This, he argued, would give the national carrier a competitive advantage and help it operate more efficiently. Kilavuka cited examples from other major airlines like Ethiopian Airlines, which has exclusive use of Terminal 2 at Bole International Airport in Addis Ababa. Similarly, airlines like Air France, Emirates, and Delta have dedicated terminals at their respective hubs, which enhances their operational effectiveness.
Kilavuka also touched on operational challenges that are affecting Kenya Airways’ profitability. He called on KAA to install a bird radar system, a crucial technology that would help prevent bird strikes, which have cost the airline Sh9.7 billion over the years. Additionally, he requested upgrades to screening machines at various terminals to improve the security and efficiency of operations.
In closing, Kilavuka made a heartfelt plea to all Kenyans to support their national carrier. He pointed out that Kenya Airways is not just an airline but a key driver of economic growth, directly employing 4,500 people and supporting thousands more indirectly. The airline also plays a critical role in connecting Africa, with a network of 40 destinations across the continent and beyond. For Kenya Airways to continue playing this role effectively, Kilavuka argued that it is imperative for the government and the public to rally behind the airline and ensure its success.
In summary, Kenya Airways is at a crossroads. While the airline has ambitious plans to expand its operations and improve its services, it is also grappling with significant financial and operational challenges. The Fly Kenya Policy, if properly enforced, could provide much-needed support, but it will require government intervention and cooperation from other stakeholders to make a meaningful impact. At the same time, resolving issues related to VAT refunds, outstanding payments, and stuck funds in foreign countries will be essential for the airline’s financial recovery.
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