The Truth Has Been Revealed (KQ wana ndege 3 tu)

[komora096]

ATCL ina ndege ngapi....hhhh

 

[Kafrican]

I geus the big question is that whether those 37 aircraft leases (if KQ only owns 3) are finance leases or operating. If anyone cared to read the financial statements of KQ .... which are publicly available btw, you will notice that the leases are finance leases. How finance leases work is that the lease runs over substantially the entire useful life of the asset. That means that upon expiry of the lease the aircraft will have a very minimal book value if any.

I dont see any difference between owning an asset or holding a finance lease over the asset. Its just a matter of cashflow management.

Now this is a person who thinks .....Waiter pea huyo tusker mbili !!!!!


I found this Audit Report from US government Auditor Generals office concerning the $800m loan KQ took (Which I guess in this case was the Capital lease agreed by the two parties for KQ to pay US-Exim for the duration of the financial lease) when they were acquiring the 9 Dreamliners..

If KQ were to default on the payment, their planes wont go back, instead the responsibility of paying back the loan will fall on GoK through the consolidated account ...


https://www.exim.gov/sites/default/... Inspection Report KQ - 09262018_Redacted.pdf
Sovereign guarantee is well supported by Kenyan Authorities and law
(b) (4)
According to the TPMD Policy Manual,
we found the sovereign guarantee to be well supported by Kenya law. In interviews with GoK officials, we learned that KQ is viewed as a strategic asset to the Kenyan economy and thus the government was willing to provide a guarantee to ensure its operations.We also confirmed with interview participants that the GoK guarantee is non‐discretionary; meaning if the debt is called it must be paid according to Kenya law.
Supra note 53.
INSPECTION REPORT OIG‐INS‐18‐01
EXPORT‐IMPORT BANK – OFFICE OF INSPECTOR GENERAL

The 2010 Constitution offers strong, lender‐friendly protections on debt repayment by the GoK. For example, it outlines the procedures within the GoK for repayment of loans and guarantees.
The Consolidated Fund, outlined in Article 206 of the Constitution, is the main account for money raised and received for the Kenyan National Government. If KQ were to default on the loan, EXIM could seek repayment directly from the Consolidated Fund without additional actions by the Parliament of Kenya because the sovereign guarantee has already received parliamentary approval for funds distribution from the Kenyan Debt Management Department. We found that the restructuring was successful in ensuring repayment of the EXIM‐supported debt.

 

[Kafrican]

So you are saying 4.4 million pax could have been flown last year without passing a 4bn loss to taxpayers..

KQ's problem has never been lack of passengers.. KQ has a load factor of 72% which is better than most airlines in the same range..... Kq's problem were as a result of poorly executed fleet expansion, even though we had good plans in place which means the main cause of KQs financial problems were bad management..

 

[Kunta kinte1776]

Kafrican,kq started incurring heavy losses due to a combination of factors,not necessary bad management,you remember around 2015 when kq first posted a loss of 27 billion ksh,ebola epidamic was ravaging west africa,so kq had to suspend its flights there and remember its one of the most lucrative routes,again kq primarily depends on african routes,another factor is hedging,due to volatility of fuel in the market kq forges a deal with fuel suplliers for a constant price despite fluctuations in the market but again it is in the same year a barrel of oil dipped a record low,this was a blow to kq due to hedging since it had quoted supplies at a higher price.the other thing is competition from middle east carriers which are eating the african market from kq,BUT the biggest blow was project mawingu when the management went into a buying spree of planes without first securing enough routes to fly them(like tz is doing)this plunged kq into infinite debt and this was the genesis of kq loss making.but my point is to those whining that kq owns three planes project mawingu delivered more planes to kq than any other ambitious venture.

 

[Kunta kinte1776]

Kafrican,kq started incurring heavy losses due to a combination of factors,not necessary bad management,you remember around 2015 when kq first posted a loss of 27 billion ksh,ebola epidamic was ravaging west africa,so kq had to suspend its flights there and remember its one of the most lucrative routes,again kq primarily depends on african routes,another factor is hedging,due to volatility of fuel in the market kq forges a deal with fuel suplliers for a constant price despite fluctuations in the market but again it is in the same year a barrel of oil dipped a record low,this was a blow to kq due to hedging since it had quoted supplies at a higher price.the other thing is competition from middle east carriers which are eating the african market from kq,BUT the biggest blow was project mawingu when the management went into a buying spree of planes without first securing enough routes to fly them(like tz is doing)this plunged kq into infinite debt and this was the genesis of kq loss making.but my point is to those whining that kq owns three planes project mawingu delivered more planes to kq than any other ambitious venture.

 

[Mkikuyu- Akili timamu]

KQ's problem has never been lack of passengers.. KQ has a load factor of 72% which is better than most airlines in the same range..... Kq's problem were as a result of poorly executed fleet expansion, even though we had good plans in place which means the main cause of KQs financial problems were bad management..

Likewise air travelers will always be there whether KQ exists or not. Those 4.4m pax would have travelled with other airlines without passing a single cent of loss to taxpayers

 

[Mkikuyu- Akili timamu]

Kafrican,kq started incurring heavy losses due to a combination of factors,not necessary bad management,you remember around 2015 when kq first posted a loss of 27 billion ksh,ebola epidamic was ravaging west africa,so kq had to suspend its flights there and remember its one of the most lucrative routes,again kq primarily depends on african routes,another factor is hedging,due to volatility of fuel in the market kq forges a deal with fuel suplliers for a constant price despite fluctuations in the market but again it is in the same year a barrel of oil dipped a record low,this was a blow to kq due to hedging since it had quoted supplies at a higher price.the other thing is competition from middle east carriers which are eating the african market from kq,BUT the biggest blow was project mawingu when the management went into a buying spree of planes without first securing enough routes to fly them(like tz is doing)this plunged kq into infinite debt and this was the genesis of kq loss making.but my point is to those whining that kq owns three planes project mawingu delivered more planes to kq than any other ambitious venture.

KQ has never suffered any "special" succumstances that ET or other african airlines never faced. Infact they were better off due to their strong brand positioning.
Having said that:
ATCL has Zero (0) planes..They do not have any risks associated with owning planes and servicing their loans. The planes are owned by GoT and leased to ATCL..For GoT, the planes are an asset that is expected to generate revenue for 30 years same as buying a treasury bond..
This is a truely unique strategy that allows ATCL to concentrate on service delivery and route expansion rather than finances and managing debt levels. On the other hand the GoT has a 30 year revenue generating asset with an option to sell and retrieve a residual value

 

[Kunta kinte1776]

Wewe mkikuyu Akili timamu,ethiopia airlines is a special case my friend.Look, the three most competitive airlines in africa are SAA,KQ and ET,both KQ and SAA are in distress while ET is blossoming,but the million dollar question is ,why is ethiopia airline prosperous while it is in its infancy while its well established counterparts with shouting brands are flying down the cliff,now here is the thing ET is heavily subsidized by its government which owns it anyway,both kq and saa are some sort of private corporations with the government owning some shares so when unforeseen circcumstances like the one i described above come calling ethiopia gavernment interceded accordingly to mitigate the risk,while kq and saa were left to the their own devices.well about atcl without first securing lucrative and profitable routes anything else is useless,there is nothing special about that 'unique strategy' GoT is simply using tax payers money to buy planes for ATCL,wheter those assets('planes) will generate interest remains to be seen but one thing for sure is they will depreciate by value each and every second,if by chance they make loss it will be a huge loss to the tax payers.so stop beating around the bush it is simply what KQ did and we know the rusults,don't we?

 

[eliakeem]

Kafrican,kq started incurring heavy losses due to a combination of factors,not necessary bad management,you remember around 2015 when kq first posted a loss of 27 billion ksh,ebola epidamic was ravaging west africa,so kq had to suspend its flights there and remember its one of the most lucrative routes,again kq primarily depends on african routes,another factor is hedging,due to volatility of fuel in the market kq forges a deal with fuel suplliers for a constant price despite fluctuations in the market but again it is in the same year a barrel of oil dipped a record low,this was a blow to kq due to hedging since it had quoted supplies at a higher price.the other thing is competition from middle east carriers which are eating the african market from kq,BUT the biggest blow was project mawingu when the management went into a buying spree of planes without first securing enough routes to fly them(like tz is doing)this plunged kq into infinite debt and this was the genesis of kq loss making.but my point is to those whining that kq owns three planes project mawingu delivered more planes to kq than any other ambitious venture.

kunta you explained a number of obvious issues which most of them based on management strategies.
the first one. Ebola sporadic is a kind of force majeure. it's very difficult to predict and again it's very hard to mitigate. this type of risk, we normally leave it as it's. which eventually will lead to depletion of the bottom line.

Secondly. The issue of forward contract, i.e hedging. KQ signed the future/forward contract so as to be safe against the risk of future oil price fluctuations. This is not uncommon for many businesses which don't want to take risk but to shift it. KQ knew after signed the contract that it will pay the outright price at par, discount or premium. So if the outright price went to the direction in favour of hedging company, i.e. lower than the contract prices, it will be good for the hedging company. But also no harm to KQ, because they are not going to be forced to pay more than the futures contract price. Therefore their bottom line will not be affected. But if KQ think that, failed to capitalise the oil price drop, next time they can use the short time futures/forwards so as to switch to non hedged situation to enjoy that low price atmosphere once happened.

thirdly. purchasing the new planes on commercial credit without being sure of which routes are going to operate, is a poor (I don't know which word to use) management decision.
I conclusively agree with the fellow who said, the KQ is making loss because of poor management of the company.

 

[Mkikuyu- Akili timamu]

Wewe mkikuyu Akili timamu,ethiopia airlines is a special case my friend.Look, the three most competitive airlines in africa are SAA,KQ and ET,both KQ and SAA are in distress while ET is blossoming,but the million dollar question is ,why is ethiopia airline prosperous while it is in its infancy while its well established counterparts with shouting brands are flying down the cliff,now here is the thing ET is heavily subsidized by its government which owns it anyway,both kq and saa are some sort of private corporations with the government owning some shares so when unforeseen circcumstances like the one i described above come calling ethiopia gavernment interceded accordingly to mitigate the risk,while kq and saa were left to the their own devices.well about atcl without first securing lucrative and profitable routes anything else is useless,there is nothing special about that 'unique strategy' GoT is simply using tax payers money to buy planes for ATCL,wheter those assets('planes) will generate interest remains to be seen but one thing for sure is they will depreciate by value each and every second,if by chance they make loss it will be a huge loss to the tax payers.so stop beating around the bush it is simply what KQ did and we know the rusults,don't we?

Actually KQ had a better chance in beating ET because its publicly listed, it can raise lots of money through rights issues, it can issue corporate bonds, and it had a cash rich partner KLM who also happens to have 80 years experince and technical capacity..ET Never enjoyed such kinds of options in financing or a partner with such depth in airline management..
On ATCL:
you need to understand that their financing structure completely relegates them to their core business of service delivery. They have no asset risks, the only thing they should do is pay the leases per year to GoT, similarly GoT can lease those planes elsewhere if ATCL sleeps on the Job..to even sweeten the deal, the planes are bought cash.. WIN-WIN

 

[Kunta kinte1776]

Eliakeem ebola epidamic came and inflicted maximum damage,it was unforseen,it is not like the management was some sought of divine gods with super natural powers to transcend the future,the management was simply dealt a hefty blow by a NATURAL calamity not designed calamity or outcome of poor decesion from the management,these folks were purely helpless,the depletion at the bottom won't write off the loses,damage happened.... Hedging is a smart move but fluctuations at the market favoured the supplier not kq.thats a loss ,thats not poor management,management is not in control of oil price. About the buying spree,couldn't agree more thats why GoT and ATCL should be worried.tried and tested

 

[Kunta kinte1776]

Mkikuyu Akili-Timamu public listing does not guarantee alternative funds to plunge or mitigate loses,its vulnerable to shocks,shares dip incase of distress,again who the hell will subscribe to a loss making corporate,bonds don't operate that way.. About atcl how much is GoT leasing to ATCl vis a vis cost of buying,bring out the light on the balance

 

[Mkikuyu- Akili timamu]

Mkikuyu Akili-Timamu public listing does not guarantee alternative funds to plunge or mitigate loses,its vulnerable to shocks,shares dip incase of distress,again who the hell will subscribe to a loss making corporate,bonds don't operate that way.. About atcl how much is GoT leasing to ATCl vis a vis cost of buying,bring out the light on the balance

Stop finding flimsy excuses for blatant corruption that sunk KQ👇👇👇

https://www.theeastafrican.co.ke/bu...Kenya-Airways/2560-3418194-qtvp0lz/index.html
At the time ET was overtaking KQ (2012) KQ was a profitable company and infact they did issue rights issues which were over subscribed. As I said there is nothing special with KQ's fall from grace except corruption

 

[Kunta kinte1776]

Mkikuyu Akili-Timamu stop engaging in a wild goose chase.Boss KQ made a record loss of 27 billion ksh ,the article you posted states that the plunder by the staff was below 1 billion ksh,thats a huge difference.make no mistake am not standing up for corrupt officials,they should rot in jail,am highlighting the bigger picture here

 

[Mkikuyu- Akili timamu]

Mkikuyu Akili-Timamu stop engaging in a wild goose chase.Boss KQ made a record loss of 27 billion ksh ,the article you posted states that the plunder by the staff was below 1 billion ksh,thats a huge difference.make no mistake am not standing up for corrupt officials,they should rot in jail,am highlighting the bigger picture here

Corruption is not the only thing that sunk KQ, bad management, fuel hedging and megalomania of expanding like uchumi supermarkets purely on debt..Ebola has little or nothing to do with KQ's problems, it affected every airline including international airlines..ATCL has nothing to learn from KQ, their expansion is not based on debt,their financing is unique.
There is no excuse, its simply incompetence

 

[eliakeem]

Eliakeem ebola epidamic came and inflicted maximum damage,it was unforseen,it is not like the management was some sought of divine gods with super natural powers to transcend the future,the management was simply dealt a hefty blow by a NATURAL calamity not designed calamity or outcome of poor decesion from the management,these folks were purely helpless,the depletion at the bottom won't write off the loses,damage happened.... Hedging is a smart move but fluctuations at the market favoured the supplier not kq.thats a loss ,thats not poor management,management is not in control of oil price. About the buying spree,couldn't agree more thats why GoT and ATCL should be worried.tried and tested

You correctly explained about the sporadic disease.
Coming to the forward/future contract, how can you say KQ made loss while the seller didn't claim any payment over and above the forward contract price? so what's the essence of having such a contract?

 

[joto la jiwe]

Eliakeem ebola epidamic came and inflicted maximum damage,it was unforseen,it is not like the management was some sought of divine gods with super natural powers to transcend the future,the management was simply dealt a hefty blow by a NATURAL calamity not designed calamity or outcome of poor decesion from the management,these folks were purely helpless,the depletion at the bottom won't write off the loses,damage happened.... Hedging is a smart move but fluctuations at the market favoured the supplier not kq.thats a loss ,thats not poor management,management is not in control of oil price. About the buying spree,couldn't agree more thats why GoT and ATCL should be worried.tried and tested

My question is, Ebola Epidemic affected only KQ, why not ET, Emirates, Turkish or other Airlines?. Most of the time we are told that Kenyans are resilient, can't it apply on KQ?.

Sent using Jamii Forums mobile app

 

[Kunta kinte1776]

Mkikuyu Akili-Timamu stop sugar coating ATCL futile rescutation with fancy words,its simply an exercise in futility,tried and tested,been there done that.i asked you a simple question,what is the balance of actual purchase of planes by GoT vis a vis cost of leasing to ATCL.that is everything..

 

[Mkikuyu- Akili timamu]

Mkikuyu Akili-Timamu stop sugar coating ATCL futile rescutation with fancy words,its simply an exercise in futility,tried and tested,been there done that.i asked you a simple question,what is the balance of actual purchase of planes by GoT vis a vis cost of leasing to ATCL.that is everything..

Unlike for profit leasing companies that have plundered KQ and normaly have short renewable leasing periods with an aim to recover their capital..GoT spreads the ATCL lease to 30 or more years. This not only gives ATCL headroom to build its route network but also its easy for their cashflow demands.
You cannot get lease terms better than what GoT gives ATCL. Because GoT treats this as a longterm "investment bond" with little yearly yeilds but cummulatively higher yeild over many years

 

[Kunta kinte1776]

Joto la jiwe those airlines you listed are heavily subsidized by their respective government,KQ is a private corporation with government holding shares..