The Star (Nairobi)

Kenya: KQ Seeks Extensions for KLM Joint Venture

KENYA Airways is seeking a seven-year grace period during which competitors cannot accuse it and its partner KLM of unfair trade practices.

The national carrier has applied to the Competition Authority for exemption of their proposed joint venture arrangement with KLM Dutch Airlines.

The joint venture will be for a period of seven year and will allow the airlines to among others set ticket prices but in respect to the said agreement, terms of routes, schedules and capacity.

The joint venture between KQ and KLM was entered in 1996 and runs regular services between Nairobi and Amsterdan and code-shared services within the two airlines' network through out North American and European markets from Nairobi

Apart from setting ticket prices, the two airlines intent to align and cordinate network management activites with respect to the joint venture and set up joint marketing and sale activities in accordance to the joint venture.

The plan also involves management of any and all revenues attributed to the performance of the joint venture by any part including setting up joint venture management systesms and analysis systems as well as an exchange of specialists staff in selected displines.

The setting of prices between two companies can be interpreted as price fixing in some quarters but the exemption allows companies to do so without violating the Competition Act.

The Competion Act defines restrictive trade practices to "any agreement, decision or concerted practice which directly or indirectly fixes purchase or selling prices or any other trading conditions."

Dividing markets by allocating customers, suppliers, areas or specific types of goods or services, and collusive tendering are all considered non-competitive behaviours.

However the Act grants exemptions to certain cases after taking into account the size of the market and customers affected by the agreement, decision or concerted practice, and the magnitude of the potential distortions on competition.

"The Authority may in its discretion grant an exemption where it is satisfied that the evidence produced by the applicant in support of its application meet the criteria for granting an exemption," the Act states in part.

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