KQ denies racket in aircraft purchase deal

November 13, 2012
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The deal is for purchase of 10 new Embraer jets from South America/XINHUA-File
NAIROBI, Kenya, Nov 13 – National carrier Kenya Airways (KQ) has denied allegations that there is a mystery over the ownership of two offshore companies associated with the purchase of new aircraft.

In a statement to the newsroom, KQ Managing Director Titus Naikuni said the two firms, Samburu Limited and Amboseli Limited based in Cayman Islands, were incorporated by the airline’s lenders Standard Chartered Bank and the African Export Import Bank (Afriexim) as part of a financing agreement to purchase 10 new Embraer ERJ-190 from South America.

“In such financing agreements the companies are commonly referred to as special purpose vehicles (SPVs). The two companies will remain the transitory owners of the brand new aircrafts currently being purchased by Kenya Airways until the loans are fully paid to the lenders,” said Naikuni.

The issue was started when representatives of retrenched Kenya Airways employees raised alarm that the two firms are owned by Kenyans, some of whom are in the management of the airline, to benefit in the purchasing.

Speaking before the Parliament’s Labour and Social Welfare Committee in September this year the Aviation and Allied Workers Union claimed the two companies were dubious and were engaging in questionable business with Kenya Airways at the expense of the shareholders.

“In the early 1990’s the airline adopted similar financing structure when it purchased four B737-300 aircrafts with the support of the Export Import Bank of the United States of America (Eximbank). KQ has since paid of the loans and the title of these aircrafts has been transferred to Kenya Airways from Simba Finance Limited, which is the SPV used in the financing Transaction,” Naikuni emphasised.

The reason for this structure is to minimize the risks associated with ownership and operation of aircrafts during loan repayment.

KQ also denies allegations of buying second hand aircrafts under the arrangement to for some specific interests adding that all the aircrafts are being purchased directly from the manufacturer, Embraer S.A.

“These aircrafts are not used or refurbished as alleged by the media,” the statement from Naikuni asserted.

In September this year KQ acquired two planes at a cost of Sh5.3 billion through the two companies.

KQ is contemplating instituting legal action against those who published what the airline refers to as false and misleading information.

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