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Kenya Airways ‘unhappy with abusive KLM tie-up’

July 26, 2017 Headline News No Comments Email Email

The ‘abusive marriage’ between Kenya Airways and Royal Dutch Airlines (KLM) may be headed for divorce, according to a colourful account in the Standard newspaper in Nairobi, Kenya.

The report said a new financial restructuring plan by the cash-strapped African airline proposes to scrap a 22-year old agreement with KLM.

The pact has turned major shareholders such as the government of Kenya into “mere pawns in the European’s airline grand plan of ruling the skies,” the Standard report said.

It said KLM would have to shed close to half of its 26.73% shareholding and would “have to contend with a 13.71 stake in KQ [Kenya Airways] in a new ownership structure that will see the Government increase its shareholding from 29.8% to 46.53%.

Kenya Airways, a public company listed on the Nairobi Securities Exchange, could then be owned by 11 banks to which it reportedly owes about KES 22.5 billion (AUD 272.5 million), the report stated.

“The Government and the 11 banks will convert their debt into equity through a complicated debt restructuring plan which is aimed at stopping haemorrhage in the airline, even as KQ [Kenyan Airways] aims to cruise into the calm skies of profitability.”

The development would “leave KLM so impotent that it will have almost no incentive to stay in the marriage,” the Standard said.

It added that KLM’s “absolute authority” extended to all aspects of the company, including approving the sale of any shares held by the Government. An objection by a single KLM director was enough to overturn a resolution passed by the 12-member board, according to the report.

The situation is complex but those with an interest can read more of it here.

Written by Peter Needham

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