National carrier Kenya Airways is purchasing planes through two offshore companies registered in the Cayman Islands. A Capital Markets Authority report on the airline shows that KQ is procuring its aircraft through the tax haven instead of directly from the manufacturer.

The report handed to the parliamentary Committee on Labour and Social Welfare shows that the airline acquired new aircraft through Amboseli Ltd and Samburu Ltd, both registered in the Cayman islands. They will own the aircraft for the period of the finance lease.

Kenya Airways acquired two planes at a cost of Sh5.3 billion through the two offshore companies in September this year. The airline has just posted a half year loss of Sh4.8 billion.

The two companies are subsidiaries of Kenya Airways Ltd, but according to CMA, the directors are two lawyers based in Cayman Islands.

The two companies are intended to give the suppliers security by allowing them to own a share of the company that controls the aircraft, the CMA report states.

Kenya Airways told the CMA that the CMA that the arrangement was normal. They used a similar arrangement with the official US Eximbank in the 1990s to purchase four Boeing aircraft.

The report states that the companies are owned by a charitable trust controlled neither by Kenya Airways nor the financing company. In September the Aviation and Allied Workers Union told the parliamentary Labour Committee that KQ had purchased planes through Amboseli and Samburu limited.

The committee was told that KQ provides bank guarantees to Amboseli for purchase of aircraft while Samburu is dealing directly with manufacturers.

Union officials claimed that the plane registered as 5Y-55A is in fact an aircraft owned by Hong Kong Airlines six years ago that was returned to the manufacturer after it developed mechanical problems. “The plane was resold to KQ,” said union chairperson Perpetua Mponjiwa.

“The company has explained that the entities are special purpose vehicles established for the purpose of the financing lease arrangement entered into by Kenya Airways Ltd with regard to the new aircraft being acquired by Kenya Airways,” says the CMA report.

For more on this story go to:

http://www.the-star.co.ke/news/article-94775/kq-buys-planes-tax-haven