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Monday, May 13, 2013

Whither Kenya Airways?

Whither Kenya Airways?

So after all the hype in 2012 regarding the Rights Issue by Citigroup, (Not-the) Standard Investment Bank and CFC Stanbic... KQ shares are trading at KES 11.35 which is 19% below the Rights Price of KES 14.00 ... I betcha that none of the 'advisers' were paid in shares but in cash. Ideally, they should have been paid in (locked-in) shares so they feel the gain or pain.

KQ is in a deep funk. Sad but true.

KQ acceded to the unions demands for higher pay/perks/benefits in 2010. The Board and Management [excluding GoK and KLM - represented by representatives not actual shareholders] which own 0.01% or less of the shares at the time agreed. They were NOT thinking like owners. They had no reason to.

Fast-forward to 2012. KQ restructures and right-sizes the labor force. I believe this was the right move to ensure KQ's long-term survival. The courts disagreed. I think many of the judges in the Commercial/Industrial divisions have little business sense.

So now we have KQ with a PBT Loss of KES 6bn vs the Rights Proceeds before fees/commissions of KES 14bn [miraculously just 0.06% above the minimum requirement] for 1H 2012-13. The 2H 2012-13 Results are due and I doubt they will be pretty.

Will KQ require another Rights Issue in 2014?
Will Kenyans participate in the next Rights Issue? [KQ needs 50%+1 ownership to meet many of the bilateral agreements]

25 comments:

bankelele said...

The possible role of Etihad in this is interesting - ready to help, but without violating the 50% Kenyan ownership rule. The IFC should yield it's ambiguous stake in KQ as even Chami knows they qualify as a foreign investor

coldtusker said...

@bankelele - The IFC is a supranational investor but as you put it, it is nothing if not a foreign investor. How will Etihad come in (significantly) unless they buy off KLM or IFC? Does it behove KQ to lose either as a key shareholder?

bankelele said...

IFC will yield, and KLM may be part of a larger Etihad tie up with Air France

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