This archive report was first published on 16 September 2019.
Kenya Airways' Half-Year Loss Doubles to Sh8.56 Billion Amid Expansion ¶
Published on September 16, 2019
Kenya Airways' half-year loss more than doubled to Sh8.56 billion, sinking shareholders into a deeper negative equity position of Sh16.18 billion.
The airline attributed the 112 percent widening of loss to increased operating costs in the wake of its expansion into new routes and the return of two Boeing 787 planes that had been sub-leased to Oman Air.
Despite the significant loss, the company's revenue jumped by 12.1 percent to Sh58.5 billion in the period, from Sh52.1 billion in the first six months of last year.
Similarly, costs jumped 15.4 percent to Sh61.4 billion in the period from Sh53.2 billion last year, eating into the carrier's margins.
Kenya Airways' financial struggles have been ongoing, with the company engaging Deloitte to carry out an independent audit on its financial records in 2016 to determine the missing links as the company continued to make losses.
The audit review focused on 40 specific foreign exchange repatriation transactions identified by the Internal Audit Department, with the key objective of identifying any anomalies, non-compliance to internal procedures and/or policies, and recommending any remedial actions.
Deloitte's investigations found many instances where a Mr. Itegi Githinji initiated and negotiated transactions irregularly, as he was not authorized to do so according to the 367th minutes of the board of directors of KQ.
The company began trading with Dubai Bank before board approval was obtained, and Deloitte established that KQ employees and their close associates may have benefited from these irregular FX transactions.
Kenya Deposit Insurance Corporation (KDIC) confirmed that Itegi Githinji had received several payments, including KES 13.5 million, while his wife Grace Wamuyu Mathenge received KES 8.5 million on three occasions from the Eastleigh Branch of Dubai Bank.
Kenya Airways' dealings with Dubai Bank date back to 2013-14, when the airline was experiencing financial difficulties. The board approved Dubai Bank as one of the banks that KQ would obtain facilities from to a maximum of KES 500 million on August 18, 2014.
However, on April 23, 2015, KQ obtained a bank guarantee of USD 7 million equivalent to KES 655,900,000, which was KES 155,900,000 above the board-approved limit. The total fees paid by KQ for the bank guarantee were USD 350,000, but this was found to have been overstated by USD 140,000.
The payment of USD 350,000 was initiated by Mr. Vuyala, with the first approver being Mr. Njiiri and the second approver being Ms. Kiboi. This exposed KQ to a significant control weakness, given that the two could initiate and conclude a payment transaction without independent checks.
While Deloitte's report did not go deeper into the matter, a whistleblower report (seen by Kenya Insights) revealed a significant amount of dirt in the Kenya's National airline, which will shock the nation when it finally unravels.
Kenya Insights welcomes the fact that the DCI has launched a probe into previous management, which will unearth the murky world that crippled the airline. The probe is currently focused on the procurement of services for the maintenance, repair, and overhaul of aircraft engines at the national carrier.
Kenya Insights requests the public to offer any relevant information that could eventually lead to prosecutions and save the company from going to the dark where it's heading.
