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Govt will only bailout KQ once it's managemnet is fully restructured

02 September 2015, 08:14 Samuel Kisika

Nairobi – The government will not inject its proposed KES 60 billion bailout for the ailing Kenya Airways (KQ) until the airline management is fully restructured.

Treasury Cabinet Secretary, Henry Rotich who appeared before the Senate Select committee inquiring into KQ affairs said the government has initiated a turn-around strategy and five-year plan for the revamping of the airline.

Rotich said the turn-around strategy will involve assessing external challenges such as terrorism and Ebola in West Africa, and internal problems including mismanagement and KQ’s entire operations that led to its KES 25 billion loss.

“The government as a major shareholder of Kenya Airways has greater interest in its survival than other shareholders. It gave out KES 4.2 billion soft loan to KQ as an equity shareholder contribution. We have demanded major changes in the airline’s management through a solid turn-around strategy before we inject in KES 60 billion bailout,” said Rotich.   

He revealed that the government has launched investigations into problems that led to KQ’s big loss and warned that legal action will be taken against any officer found responsible for the mismanagement.

Read Also: Kenya Airways might need KES 60 billion bailout

“We don’t want to act on emotions by sacking KQ directors but investigations are being done in a structured manner to ascertain whether there was a problem in decision-making by the board of management in investing into various initiatives including the Mawingu project,” said Rotich.

The Cabinet Secretary blamed the airline’s management of investing in various initiatives such as the purchase of more airlines to increase its fleet without a proper business plan.

However, the Senate committee chaired by Anyang' Nyong’o (Kisumu) questioned Rotich why two government directors in the KQ board of management failed to report on the airline’s performance to their respective Cabinet Secretaries in the Transport and Treasury ministries.

“KQ directors were not keen on reporting to the management whether the airline was making profit or loss,” claimed Daniel Karaba (Kirinyaga).

Billow Kerrow (Mandera) raised the concern that the presence of KQ directors in office amid ongoing investigations to establish causes of the airline’s loss may interfere with the probe as the officers played a key role in covering up the loss.

“The KQ chairman in charge of the board, CEO who is answerable to the board and the Chief Operations officer overseeing the airline’s operations should be held responsible for the incurred loss,” said Nyong’o.

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