Black day for Blackwater founder Prince as KCAA grounds Kijipwa Aviation

BLOW FOR FORMER BLACKWATER TSAR AS KCAA PULLS HIS AIR SERVICE LICENCE

(Posted 28th October 2014)

No Blackwater shenanigans in Kenya’ appears to be the message sent out by Kenya’s Civil Aviation Authority when news emerged that Kijipwa Aviation Limited, a locally incorporated airline with a base at their own airfield in Kilifi county, Kenya coast, was denied the renewal of their air service license, effectively grounding them.

Blackwater founder Erik Prince, through the Hong Kong based FSG company where his is now serving as Chairman of the Board, had acquired a 49 percent stake in Kijipwa earlier this year, surprising pundits and aviation observers what purpose such an acquisition could have, considering the location and size of the airline, and yet appears to have paid for the share in what appears way over market price.

This was then followed by the acquisition of Phoenix Aviation which is based at Nairobi’s Wilson Airport, first again a 49 percent minority share before reportedly taking over the company altogether in an outright buyout.

A source close to the KCAA has indicated that the licensing committee had raised questions on the actual control of Kijipwa, cognizant of the fact that Kenya’s laws permit only a foreign shareholding of up to 49 percent, which if correct will also throw some serious doubts over future license renewals for Phoenix, where no doubt similar questions are already being asked by the regulators.

Foreign investors have often negated such limitations by using local law firms or proxy shareholders to hold the critical majority share in trust, with trusted individuals then acting in meetings of the board or annual or extraordinary general meetings of the company strictly on directives by the true owners, in many cases often backed up by signed but undated share transfer forms and resignation letters as directors, held over the individuals to ensure compliance with ‘instructions and orders’.

In the case of FSG and Kijipwa the 49 percent barrier does not appear to have been breached, unless the regulators came across additional information not yet in the public domain, while for Phoenix this threshold appears to have been crossed when FSG got permission from the competition watchdog for a full acquisition and then, according to business and financial media in Kenya, proceeded with the buyout.

Considering the hard push by Chinese companies into the emerging oil businesses in Eastern Africa, in South Sudan, Uganda and Kenya, it remains to be seen what inevitable leverage if not brute pressure will be brought to bear on Kenyan authorities to take a fresh look and it is already understood that Kijipwa Aviation and by prolongation FSG will appeal the KCAA decision, seeking to have the company’s air service license restored and renewed. Any contracts already signed between Kijipwa and clients in the oil industry, will no doubt now be hanging in suspense and with the potential revenues lost this will no doubt be an added incentive for Kijipwa and FSG to pull out all stops to regain their license and resume operations.

Meanwhile, according to a message received from an aviator from Nairobi, were several glasses raised at the Aero Club of East Africa’s bar at Wilson Airport when the news broke, which if true would signal the strength of sentiment against FSG in general and Prince’s past track record as a defense contractor in Iraq in particular. Watch this space for more information as and when it becomes available.

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