Kenya Airways, Precision Air seek waiver extension of competition rules

Kenya Airways and Vietnam Airlines are members of the SkyTeam Global Airline Alliance, and frequent flyers can therefore earn miles on both airlines, while Elite Plus travellers benefit from SkyPriority services. PHOTO | FILE | NMG

By BRIAN AMBANI

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Kenya Airways (KQ) has applied for an extension of a special exemption granted two years ago, allowing creation and sharing of revenues on routes serviced in a joint venture pact with Tanzania’s Precision Air.

The Competition Authority of Kenya (CAK), in its latest report for the financial year ending June 2023, said the application is under review.

“The airlines applied for exemptions on co-ordination on a number of aspects of the services offered, including reciprocal code sharing, alignment and co-ordination of management activities and pricing of ticket fares,” said CAK.

In 2018, the two airlines sought an exemption from CAK because, under the joint venture, they would share sensitive information contrary to provisions of section 21(3) of the Competition Act. This allowed them reciprocal codesharing on the routes operated by the two airlines.

The deal also enables the two airlines to co-ordinate their network, align fares on the joint venture routes, coordinate the management of revenue on the routes, and co-ordinate marketing and sales.

CAK granted KQ and Precision a four-year exemption to extend their joint venture until April 11, 2022. KQ owns a 41.23 percent stake in Precision Air Services, which it acquired in 2003.

KQ flies to 42 destinations across the world, while Precision offers scheduled and chartered air passenger and cargo transport services with domestic flights within Tanzania and regional flights to Nairobi and Moroni, Comoros.

CAK says the two airlines had earlier reached out requesting an advisory opinion on whether they could extend the joint venture agreement exemption upon its expiry.

“The parties were informed to apply afresh for the renewal of the exemption as per the provisions of the Competition Act,” said CAK.

The quest for an extension of the exemption indicates the two airlines are reaping the benefits of the joint venture even as demand for air travel between Kenya and Tanzania continues to grow. The two carriers have a code-sharing agreement that enables them “to sell seats on each other’s planes on the Nairobi-Dar es Salaam route.

Read: Kenya Airways to resume flights to Somalia

KQ narrowed its net loss by 40.6 percent to Ksh22.6 billion ($172.52 million) in the year ended December 2023, helped by a surge in revenues. The company had made a net loss of Ksh38.2 billion ($291.6 million) the year before.

KQ grew its sales 52.8 percent to Ksh178.4 billion ($1.36 billion) as it rebuilt its route network and capacity from the depths of the Covid-19 pandemic that disrupted the global aviation sector.

The airline recorded an improvement in operational results which were however wiped out by losses on foreign exchange and early lease terminations.

KQ posted an operating profit of Ksh10.5 billion ($80.15 million), reversing an operating loss of Sh5.6 billion ($42.75 million) a year earlier.
This reflected the faster growth in revenue, compared with operating costs, which increased 37.2 percent to Ksh167.9 billion ($1.28 billion).