Azimio, Kenya Kwanza hands exposed in KQ pilots strike

The political battle between the two top coalitions in the August general election has spilled over into the ongoing strike by Kenya Airways pilots. 

By Monday night, the airline management and pilots were yet to reach an agreement.

KQ management insisted there would be no talks before the pilots return to work.  

“It is too late for talks. They either come to work or we replace them,” KQ boss Allan Kilavuka said. 

Pilots on the other hand said they are ready for meaningful engagement once KQ comes to the table.

"We remain committed to finding an amicable solution," Kenya Pilots Association secretary general Muriithi Nyagah told a presser. 

The Star has learnt that the Azimio La Umoja One Kenya Alliance and the ruling coalition, Kenya Kwanza, are secretly supporting the pilots' strike to settle a political score. 

"The Azimio side is riding on the strike to parade the current administration's incompetence while the Kenya Kwanza one is rooting for an overhaul of KQ's board and management," a source privy to the crisis told the Star in confidence. 

Some top officials in government believe that key people in former President Uhuru Kenyatta's regime continue to benefit from alleged mismanagement at the national carrier, the source said. 

He cited the recent tiff between Deputy President Rigathi Gachagua and Kenya Airways chairman Michael Joseph as just a spark in the raging fire. 

The trade unionist in support of the pilots' strike revealed that top officials in the current government and opposition are backing the 400-member association.

"There is a lot happening behind the scenes. While the strike is building a case for the opposition, some people in the government want KQ board and management disbanded."

In an interview with Citizen TV early last month, Gachagua stated that the reason behind KQ's losses is bad contracts that they had entered into to benefit a few individuals he claimed were part of state capture. 

"We have had very serious discussions with Kenya Airways. Their planes are always full and they have the highest fares in the continent, yet they make losses because of state capture," the DP said.

Gachagua accused companies leasing aircraft to the airline of milking the company and taxpayers, terming it "state capture". 

"We are dealing with that so that we can bring down the operational cost of KQ with the aim of returning the Nairobi Securities Exchange listed firm back to profitability".

He went on to dare the KQ management to name beneficial owners of the aircraft leasing firms which are domiciled in a tax haven. 

This rubbed the KQ leadership the wrong way, with board chairman Michael Joseph calling out Gachagua for "misleading the nation". 

The KQ chairman denied claims of state capture, saying the contracts are purely commercial business agreements whose aim is to benefit the airline.

He said the national carrier had entered into lease agreements with renowned international companies that manage hundreds of aircraft leases to different international airlines globally.

"Because of the complexity and size of the lease, financiers typically prefer to use Special Purpose Vehicles (SPVs) to facilitate the finance leasing transaction," Joseph said.

He said the setting up of SPVs is standard industry practice, as evidenced in the relevant IATA aircraft financing literature, and is a regular practice for significant asset financing.

In a statement, KQ said SPVs are a long-term financial lease with an option to purchase aircraft at the end of the agreement. KQ currently has two SPVS such as Tsavo and Samburu.

Operating leases are a legal agreement between two parties, a lessor and lessee, where the lessor agrees to provide the aeroplane to the lessee (KQ) for a set period of time in exchange for regular payments called rentals or lease payments, KQ added.

"KQ deals with the following international renowned lessors; Dubai Aerospace Enterprise (DAE), AERCAP, Bank of China (BOC) Aviation, China Development Bank (CDB) Leasing, Deucalion, Macquarie, Aviation Capital Group (ACG), Goshawk, Nordic Aviation Capital (NAC), Azzora, Chorus Aviation, NAC and Montrose."

Currently, the firm has leased 35 aircraft comprising 18 (finance lease) and 17 (operating lease).

In the last financial year, the airline said it saved Sh11 billion after changing aircraft leasing agreements from fixed costs to hourly rate.

Joseph also dismissed claims that they were overcharged for key services offered to the airline.

"The costs are within the prevailing market rates at the time of negotiating the transactions."

Several leaders leaning towards the Azimio coalition have in the past four days seemed to support the industrial action, saying that the current regime has failed to bring order.

On Saturday, ODM secretary general and Nairobi Senator Edwin Sifuna told off Transport CS Kipchumba Murkomen and Kenya Airways management on their remarks about the standoff.

"As a member of Senate Transport Committee and being one of the affected passengers, I disagree strongly with the tone adopted by CS Murkomen and the KQ management on this matter of KQ pilots," he said.

The lawmaker stated that threats never work in terms of solving problems and urged the CS and KQ management to engage pilots in meaningful talks.

"Threats never work. Talk to the pilots, engage people. It's a test for us, not you bwana," Sifuna said.

On October 19, the pilots' lobby gave KQ 14 days to reinstate the staff Provident Fund which was withdrawn in July 2020 as Covid-19 squeezed the airline's revenue. 

According to Kalpa, the airline owes its members at least Sh700 million plus interest. 

"We request that KQ's management obey contractual agreements, stop harassment of union officials, weed out unqualified personnel and resolve poor governance," Nyagah said.

On the Provident Fund, the association said the act is a violation of the terms and conditions of service of its members and clause 38(a) of the CBA in force between the association and KQ.

KQ management has insisted that the airline is currently in a financial hole and can only reinstate the fund once it returns to profitability in 2024.