Nairobi High Court rules on Kenya Airways state loans
Government loans to Kenya Airways (KQ, Nairobi Jomo Kenyatta) do not automatically convert the airline into a public entity, according to the High Court of Kenya.
Based on this finding, the High Court recently dismissed a petition by Senator Okiya Omtatah to ban Kenya Airways from sending its pilots to flight schools in South Africa, The Star newspaper reported. Omtatah had sought an order requiring Kenya Airways, as a recipient of public funds, to procure its pilot training services and other goods and services in Kenya. The petitioner claimed that Kenya Airways had discriminated against local pilot training schools and pilots trained by local institutions licensed by the Kenya Civil Aviation Authority (KCAA).
According to a statement released by ALN Kenya, lawyers for Kenya Airways, the claimants sought to have Kenya Airways designated as a public entity, which would subject it to the Public Financial Management Act (PFMA), the Public Procurement Act and Disposal of Assets (PPADA) and Crown Corporations Act (SCA). The legal argument centered on shareholder loans given to the airline by the Kenyan government, which owns 48.7% of the carrier.
In dismissing the petition, the High Court found that Kenya Airways was not a public entity because the government does not have control over it and the airline is not established under the Companies Act. State, explained ALN. Therefore, the court concluded that the government loans to the airline were not public money. Thus, Kenya Airways purchases were not subject to PFMA or PPADA. By implication, the government could not interfere with the decisions of Kenya Airways management and board, ALN said.
The government approved a state loan of KES 20 billion (USD 173.9 million) in May 2022 for operating cash and partially pay for its restructuring. In addition, the airline borrowed KES 11.3 billion (approximately $95 million) in the six months ending June 30, 2022. This follows loans of KES 11 billion ($95.2 million ) in 2020 and KES 14 billion ($121.1 million) in 2021.