The two airlines want an exemption from competition regulations so that they can set ticket prices together.
The two firms already have a code-sharing agreement, which allows airlines to sell seats on each other’s planes.
Kenya Airways has a pre-existing joint operations agreement with shareholder Dutch airline KLM.
Kenya Airways is seeking regulatory approval to discuss price setting and revenue sharing on certain routes with its Tanzanian partner, Precision Air.
The national carrier, known by its international code as KQ, has a 41.23 stake in Precision Air.
The two airlines want an exemption from competition regulations so that they can set ticket prices together; manage and market certain routes jointly; and at the end of the day share the money earned on these routes.
The two firms already have a code-sharing agreement, which allows airlines to sell seats on each other’s planes, on the Nairobi-Dar es Salaam route. However, the proposed agreement would lead to greater integration between the two companies’ activities.
“In this joint venture agreement, the parties intend to align and co-ordinate the management of any and all revenues attributable to the performance of the joint venture by either Kenya Airways or Precision Air,” said Competition Authority director general Wang’ombe Kariuki in a notice. Although competition laws forbid collusion to set prices, the law also allows companies to apply for exemptions. The Competition Authority gave the public 30 days to submit opinions on the proposal.
Kenya Airways has a pre-existing joint operations agreement with shareholder Dutch airline KLM. The agreement allows the two firms to co-ordinate scheduling and marketing on the Nairobi-Amsterdam route.
Joint venture
Dar-listed Precision Air in its 2016 annual report said that the joint venture with KQ would increase passenger traffic on its network.
Both Kenya Airways and Precision Air are going through a period of financial turbulence. In the year to March 2016 Precision Air recorded Sh4.2 billion (TZS 91 billion) in losses citing weakening of the Tanzanian shilling against major world currencies. During a similar period, KQ recorded losses of Sh26.2 billion. KQ has been plagued by labour challenges that saw contract staff down their tools last year as pilots also threatened to demonstrate.
Nevertheless, the carrier saw its passenger numbers grow 4.8 per cent to 1.12 million in the three months to December 2016. KQ is increasingly focusing on its biggest market, Africa, with regional routes being the best performing. Passenger numbers in East Africa grew 7.1 per cent in the three months to December.
KQ is undergoing a turn-around plan helmed by its new board chairman, Mr Michael Joseph. The strategy to return to profitability has been characterised by slashing of operating costs; the disposal of assets; staff retrenchment as well as an overhaul of top management with chief executive Mbuvi Ngunze set to resign next month.
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