Kenya Airways: A Call for Financial Support from the Government
Kenya Airways, the national carrier of Kenya, is facing significant financial challenges, with a staggering Sh3.54 billion owed to it by various government entities. This revelation was made by the airline’s Chief Executive, Allan Kilavuka, during a recent session with the Senate Committee on Roads, Transportation, and Public Works. The debts owed by the Parliament, the Foreign Affairs Ministry, and the Kenya Revenue Authority (KRA) highlight the pressing need for government intervention to stabilize the airline’s operations.
Outstanding Debts and Financial Strain
According to Mr. Kilavuka, the KRA alone owes Kenya Airways Sh2.7 billion in Value Added Tax (VAT) refunds as of August 2024. This substantial amount is a significant burden on the airline, which has been struggling to maintain its financial health amid various operational challenges. Additionally, the Foreign Affairs Ministry has an outstanding debt of Sh294 million in unpaid air tickets, while the National Assembly has yet to clear Sh242 million. Other government bodies, including the Parliamentary Service Commission and the Directorate of Immigration Services, have also contributed to the mounting debt, with unpaid amounts totaling Sh191 million and Sh32 million, respectively.
The Need for Government Assistance
Mr. Kilavuka emphasized the urgent need for government support in collecting these outstanding amounts, which total Sh840 million as of September 2024. He urged the government to expedite the payment of VAT refunds, which are critical for the airline’s cash flow. The situation is further complicated by funds that are stuck in various jurisdictions, including Nigeria, Malawi, Ethiopia, and Burundi, amounting to Sh1.4 billion. This financial entanglement underscores the complexities faced by Kenya Airways in its operations across the region.
Parliament: A Major Customer with Unsettled Bills
Interestingly, Mr. Kilavuka pointed out that Parliament is one of Kenya Airways’ largest customers. Despite this, the debts owed by the National Assembly and its associated bodies remain unpaid. He noted that while the debts from these entities are significant, there are other state agencies with even older debts. This situation raises questions about the efficiency of budget allocations and the accountability of government departments in settling their financial obligations.
Compliance with the Fly Kenya Policy
In light of these challenges, Mr. Kilavuka called for the enforcement of the Fly Kenya Policy, which was established in 2016 to prioritize Kenya Airways for air travel by government ministries, departments, and agencies. Despite qualifying for preferential treatment under this policy, compliance has been disappointingly low, with only a 30 percent adherence rate. The lack of enforcement mechanisms and the competitive pricing from travel agents have hindered the airline’s ability to benefit from this policy fully.
Proposal for a Special Economic Zone
To further bolster its operations, Kenya Airways has proposed the registration of a Special Economic Zone (SEZ) for specific activities at its infrastructure sites, including the Jomo Kenyatta International Airport (JKIA) and the Pride Centre in Embakasi. Mr. Kilavuka explained that this SEZ would facilitate the establishment of an engine repair and overhaul facility, which would not only serve the airline’s fleet but also cater to third-party carriers. The establishment of such a facility would position Kenya Airways as a leader in this specialized field in East and Central Africa, following Ethiopia’s example.
Competitive Landscape in Air Travel
Mr. Kilavuka also highlighted the need for the government to enforce the Air Service Agreement for Kenyan carriers to ensure reciprocity in air travel. Currently, Kenya Airways operates only 10 weekly flights between Kenya and the Middle East, compared to 29 flights operated by Middle Eastern carriers. This disparity in flight frequency underscores the competitive challenges faced by Kenya Airways in the international aviation market.
Conclusion
The financial struggles of Kenya Airways, compounded by outstanding debts from government entities and the need for policy enforcement, paint a challenging picture for the national carrier. As it seeks to navigate these turbulent waters, the call for government support and strategic initiatives like the establishment of a Special Economic Zone could be pivotal in ensuring the airline’s sustainability and growth in the competitive aviation landscape.