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Grounded Airline Prompts Suppliers to Avoid Leasing Aircraft to Kenya

Aircraft operators in the country are facing a challenge in getting leased airplanes.

This follows a move by the Kenya Airports Authority (KAA) to detain a fleet of flights belonging to Five Forty Aviation Limited.

The low-cost domestic airline recently grounded is under investigation over a Sh2.5 billion debt for 19 leased aircraft.

Ongoing investigations have deepened the row over ownership of the planes managed by the Five Forty Aviation Limited, including seven claimed by a Canadian firm.

Companies laying stakes to the leased planes now want Fly540 to pay $17 million accrued over a period of time citing breach of agreement.

A standoff over Sh77 million jet fuel allegedly supplied to the airline by Fine Jet Limited has lifted the lid on the latest fights.

Fly540 also faces another Sh1 billion bill allegedly owed to Kenya Airports Authority (KAA) and Sh400 million demanded by the KCAA for landing and parking fees.

The move by KAA has sparked another crisis by suppliers of the aircrafts.

Whereas it was normal for the suppliers to lease planes to Kenyan companies, they are now fearing to do the same.

This is after Kenya was classified as a high-risk country to lease aircrafts to.

They fear they may fall in same way those of Fly540 went.

This has forced players in the industry to dig deep into their pockets to get money for purchase of the needed planes.

“Why can’t KAA release the planes to do business and recover the money needed? They are rotting at parking yards at the expense of the owners,” said one operator.

He added the new trend is now expensive for them to manage and urged the highest authorities in the country to intervene and save the situation.

KAA have a credit policy of 30 days yet they allowed Fly540 to accrue debt for over three years.

This has exposed the authority to many dangers.

There are now even claims the detained planes are being vandalized.

“Who will pay for this if and when the matter is settled? We in need of help.”

On May 8, the owners of Renegade Air (Kenya) announced the acquisition of a new plane from Avmax Group Inc. (Avmax).

Avmax delivered a MSN 7107 (CRJ 200) marking a significant step forward in

bolstering Renegade Air’s fleet capabilities.

This was after the owners met stringent measures put in place in the wake of the detention of the Fly540 planes in a dispute over money.

Insiders protested the suppliers were demanding too much to cover their fears of falling into a similar situation as that of Fly540.

“This is an example of how bad things are,” said an insider.

An investigation is also underway over the cannibalising of aircraft grounded by KCAA and KAA at Wilson Airport amid claims expensive parts are removed from the parked planes and sold to unsuspecting clients.

One of the aggrieved parties reached out to Transport Cabinet Secretary Kipchumba Murkomen to intervene under the Cape Town convention to get their grounded planes released.

The CS tasked his Principal Secretary (PS) Mohamed Daghar to act on the matter in line with the Cape Town Convention and Protocol.

The air treaties aim to resolve the problem of obtaining certain and opposable rights to high-value aviation assets, namely airframes, aircraft engines and helicopters which, by their nature, have no fixed location.

The convention seeks to address the problems that primarily arise from the fact that legal systems have different approaches to securities, title retention agreements and lease deals, which create uncertainty for lending institutions regarding the efficacy of their rights.

This hampers financing for such aviation assets and increases the borrowing cost. Kenya is among 65 signatories who are parties to the convention.

“The CS was seized of the matter and delegated to the PS to find a way to assist the concerned parties.

The PS acted on the letter immediately and asked both KCAA and KAA to release the aircraft,” said an official at the ministry aware of the development.

Although KCAA is reported to have complied with the PS’s directive, KAA is reported to have continued holding the planes over non-payment by Fly540.

“When the lenders asked to see the aircrafts at Wilson airport, they were shocked to find the condition they were in, despite Kenya being a signatory to the Cape Town Convention and Protocol, which also extends to securing the assets,” disclosed an official at Wilson airport.

The officials added that the aircraft had missing parts, including engines.

Directorate of Criminal Investigations (DCI) sleuths are now probing possible collusion between Five Forty Aviation and aviation authority officials to defraud taxpayers, through the accrued debts spanning years and also failing to secure them.

The police wrote to the KCAA boss Emile Arao requesting the production of documents.

“This office is investigating an alleged matter of theft of aircraft parts reported by Avmax Aircraft Leasing Inc,” reads part of the letter.

“It is alleged that the stolen aircraft part with a reduction gear Box S/No. AG0042 was fitted to one of the complainant’s aircraft at the time of registration. As a matter of urgency and towards our investigations, we request that you furnish us with certified copies of initial Certificate of Airworthiness issue documents pertaining to Aircraft Reg. No 5Y- CGL and SY-RJS.”

“Certificate of registration pertaining to Aircraft Reg. No. 5Y-CGL and 5Y- RJS. Any other relevant information that can assist in the investigation,” added the letter.

Arao acknowledged receipt of the DCI letter dated September 27 on October 6 and sent the required documents.

“As requested, please find attached certified copies of certificates relating to aircraft nationality and registration marks 5Y-CGL and 5Y-RJS. The certificates of airworthiness indicating the date of initial issues and renewals and certificate registration (Cof R).”

In the documents shared by KCAA boss, ownership of the disputed aircraft is Avmax, based in Canada and the name of leaser is Fly540, with the lease agreement signed in 2018.

An investigation showed there was indeed a reason for Avmax to complain.

“There was a valid reason for Avmax aircraft leasing Inc. complaint and subsequent grounding of the aircraft by the authority,” reads the report by the team signed by Mr A. Lumutu and E Mungai.

“The details of RGB s/N:AG0042, propeller hub, actuator and blades on engine no. 2 match with the details provided by Avmax to be investigated,” the report recommended.

Specifically, a gearbox engine allegedly stolen at Wilson Airport, was later recovered in South Africa after probe, already sold to another firm.

Avmax Technical Manager Africa Russ McNeil in one of the complaint letters to DCI, documents three people alleged to have been to the aircraft at Wilson, also included in the OB.

On April 8, Five Forty Aviation Limited also appointed Peter Nganga of Petfiend auctioneers to recover the sum of $207,600 as cost for storage of aircraft Reg. No SY-BUZ.

The Canadian aircraft leasing firm recently moved to court to stop the auction of its two planes, arguing that it has nothing to do with the current debt Fly540 owes the State parastatals.

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