Kenya Airways (KQ) has sued a US-based supplier, Aero Industrial Sales (AIS), over an alleged breach of a multi-million dollar agreement for the disposal of surplus aircraft parts from its Boeing 777 fleet.
The national carrier says AIS failed to account for, remit proceeds from, or return inventory under a 2016 three-year consignment agreement covering surplus components, tools and equipment from Boeing 777-200 and 777-300 aircraft.
Under the contract, AIS was to guarantee minimum net proceeds of $2.75 million (about Sh356.12 million) from the sale of the excess stock.
In a suit to be heard today before the High Court, KQ now claims AIS has failed to honour the terms of the agreement and is seeking either payment equivalent to the value of the stock or a full reconciliation of all items received, sold and remaining, alongside remittance of proceeds and the return of unsold inventory.
The airline is demanding $11.84 million (about Sh1.53 billion), representing the alleged value of aircraft parts shipped to AIS between October 2016 and September 2020.
Total unpaid sum
KQ argues that AIS has neither remitted proceeds from sold items nor provided adequate records of inventory under its custody.
“The plaintiff’s claim against the defendant is for a total unpaid sum of $11,844,742, being the actual value of the excess stock shipped and delivered to the defendant on diverse dates between October 2018 and September 2020,” KQ states in court papers.
Alternatively, the airline wants the US firm compelled to provide a full account of stock received, sold and remaining, and to remit proceeds from sales while returning any unsold items.
KQ further alleges that AIS failed to provide status reports, monthly sales updates and proper inventory records as required under the agreement.
The airline also contends that the value of the stock may be higher than initially estimated, citing air waybills indicating shipments worth $17.64 million (Sh2.28 billion), though it says a 50 percent discount was applied to account for used components, arriving at the disputed figure of $11.84 million (Sh2.31 billion).
“The total cost of the items shipped and delivered to the defendant, as supported by the air waybills, is actually $17,641,454.12,” KQ argues, adding that adjustments were made to reflect the condition of the items.
The airline is also seeking interest on the alleged sums and costs of the suit.
Parallel legal battle
AIS, however, admits the existence of the 2016 agreement but disputes KQ’s claims, saying it acted as an agent in the transaction and that the airline failed to deliver all the parts as agreed.
In its counterclaim, AIS alleges that KQ did not provide the full inventory list and was obligated to replace missing items under the master agreement.
“The defendant avers that, among other obligations contained in the master agreement, the plaintiff had an obligation to provide the surplus aircraft parts and materials and replace any parts missing from the list supplied,” AIS states.
The dispute has since taken a cross-border dimension, with AIS filing a separate case in a New York district court in June, accusing KQ of failing to pay $1.13 million (Sh146.33 million) for aircraft parts allegedly supplied.
KQ has yet to respond to the US proceedings, setting the stage for a parallel legal battle across two jurisdictions.
