The Kenya Airports Authority (KAA) is grappling with a mounting financial crisis, facing a staggering Sh13.8 billion in outstanding claims.

Contractors and the taxman are tightening the noose, demanding payment for unpaid taxes and breached contracts, casting a long shadow over the authority’s operations and potentially stalling crucial projects.

The authority’s 2022/23 annual report paints a grim picture of its financial health.

It acknowledges a mounting pile of contingent liabilities, a direct consequence of adverse court rulings and a host of pending legal battles demanding hundreds of millions of shillings in compensation.

A particularly thorny issue is a Sh4.2 billion tax assessment levied by the Kenya Revenue Authority (KRA) on air passenger service charge (APSC).

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KAA vehemently disputes this claim, arguing that APSC is a statutory charge collected by KRA itself and, as such, is exempt from taxation.

“The authority has objected to this tax assessment on the grounds that APSC is a statutory charge collected by KRA and remitted to KAA and is therefore not subject to tax. KRA has informed that they have sought for calendar of mediation meetings from the Attorney General's Office for all matters withdrawn by the State Agencies,” the report states.

The KAA is also embroiled in a series of disputes with contractors.

Two companies have already secured arbitral awards totalling over Sh600 million for alleged contract breaches.

Relief & Mission Logistics, an emergency sourcing and supplies firm, is seeking a hefty Sh719.7 million in compensation after its contract for passenger transfer services at Jomo Kenyatta International Airport (JKIA) was terminated in 2015.

Despite an arbitral award in its favour, the KAA has challenged the decision in the High Court, citing legal advice from the Attorney General.

“The Attorney General's legal advisory was issued on 3rd May 2021 advising the authority to set aside the award. The authority has filed an application at the High Court to challenge the award and seeking to set aside the same,” the report reveals.

Other contractors, including Baseline Architects Ltd, Roder Hts, and Catic, are also pressing claims against the KAA, demanding hundreds of millions of shillings for unpaid works, contract variations, and other costs.

Adding to the KAA’s woes is a Sh766.25 million claim from Mitu Bell, a welfare society, stemming from the forced eviction of thousands of families from Mitumba Village in 2011.

The cumulative effect of these legal challenges is a significant strain on the KAA’s finances, with the potential to cripple its operations and undermine its ability to deliver essential aviation services.