Kenya Airways #ticker:KQ and Tanzania’s Precision Air are now free to set prices and share revenues among other commercial decisions on their common routes after the Competition Authority of Kenya (CAK) approved the carriers’ joint venture deal.
The airlines already have code-sharing agreement that allows airlines to sell seats on each other’s planes on the Nairobi-Dar es Salaam route.
They had applied to be exempted from competition regulations in their deal that will also allow them to fix route schedules and collaborate on sales and marketing activities.
“Following the application notified vide Gazette Notice No. 4657 of 2018, 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 (4) years ending 11th April, 2022,” CAK said in the latest Kenya Gazette.
The joint venture destinations are Nairobi, Mombasa, and Kisumu, Dar-es-salaam, Kilimanjaro and Zanzibar. Although competition laws forbid collusion to set prices, the law also allows companies to apply for exemptions.
KQ, as the national carrier is known by its international code, acquired a 41.23 stake in Precision Air for Sh230 million and which it has since written off.
“Kenya Airways Plc owns 41.23 per cent equity interest in Precision Air Limited. The Investment was fully impaired in 2013 as the directors do not expect the value of the investment to be recovered,” KQ says in its annual report.
Precision Air had a negative equity of Sh9.1 billion in the nine months ended December 2017 when it reported a loss of Sh360 million on revenues of Sh4.3 billion. KQ also has a negative net worth brought by losses and high debt levels.
The national carrier narrowed its net loss 28.8 per cent to Sh4 billion in the half year ended June when its book value slid to a negative Sh3.8 billion.