NAIROBI, SEPTEMBER 18 ― Kenya Airways and Tanzania’s Precision Air have been allowed to freely make commercial decisions including price setting and revenue sharing on common routes.
This follows the approval of their application to the Competition Authority of Kenya (CAK), which sought exemption from regulations that prohibit collusion to set prices.
The two had tabled their request in May this year, under a Joint Venture Deal that covers at least six destinations.
These are Nairobi, Mombasa, Kisumu, Dar-es-salaam, Kilimanjaro and Zanzibar.
The competition laws which forbid collusion to set prices equally provide room for companies or business entities to apply for exemptions.
“It is notified for general information that the Authority has granted an exemption for the Joint Venture Agreement between Kenya Airways PLC and Precision Air Services PLC for a period of four years ending 11th April, 2022,” the competition watchdog said in a recent Kenya Gazette.
The two carriers will now discuss revenue sharing, price setting, route schedules, sales and marketing among other quotas on their key routes in Kenya and Tanzania
KQ, as it is known by its international code, and Precision Air already have a code-sharing agreement which allows either party to sell seats on each other’s planes on the Nairobi – Dar es Salaam route.
The national carrier owns 41.23 per cent equity interest in Precision Air Limited acquired for Ksh230 million. The Investment was however written-off, which according to the company, its directors do not expect the value of the investment to be recovered.
Last year, Precision Air reported a loss of Ksh360 million on revenues of Ksh4.3 billion, with a negative equity of Ksh9.1 billion in the nine months to December. KQ on the other hand has been struggling to come out of losses.
The Nairobi Securities Exchange listed airline narrowed its net losses by 28.8 per cent to Ksh4 billion in the half-year ended June, helped by cost-cutting measures and revenue growth. It reported a net loss of Ksh5.6 billion in a similar period last year.
The company’s revenue rose 3.1 per cent to Sh52.1 billion for the period ended June with the management expressing concerns over high fuel prices which was eating into its margins.
The latest developments are expected to allow synergy in operations, allowing the two airlines to fully capitalize on the Joint Venture for profits.