Aviators uneasy over KQ merger bid

Passengers at JKIA. Aviators fears there will be a blurred line between KQ and the regulator. [Elvis Ogina, Standard]

The bringing together of Kenya Airways (KQ) and Kenya Airports Authority (KAA) could create an entity that dominates the local aviation sector much to the detriment of competition. It could also lock out the entry of new players.

The National Aviation Management Bill 2020, which sets out the modalities of nationalising the carrier, also proposes consolidation of assets of KAA and KQ.

The two entities will operate under one holding company – the Kenya Aviation Company that would manage airports.

There are fears that the firm could give preferential treatment to KQ, a move that would be unfavourable to both local carriers, many of them small, and international airlines.

At a sitting with the Ministry of Transport officials last week, National Assembly’s Committee on Transport expressed concerns that the Bill had proposed entities that might kill competition.

The MPs noted that while KAA and KQ currently play distinct roles, where the authority ensures fairness in use of airports by carriers while KQ is a client, these lines would be blurred once the Bill is passed.

“KAA is currently like an umpire but when this (consolidation) is done, they will be one family,” said Ruaraka MP TJ Kajwang last week, when National Assembly’s transport committee met with officials from the Transport Ministry.

The Competition Authority of Kenya (CAK) said though the move to consolidate the assets of KQ and KAA could hurt other carriers, there are mechanisms within the law to check on abuse of dominance and had advised the Ministry of Transport on lines not to cross.

“We have advised that conduct of the resultant entity may have some ramifications on the competition process in terms of favouring one of the companies which is a beneficiary of the consolidation… we highlighted some of the conduct that may be anti-competitive,” said CAK Director-General Wangombe Kariuki.

“We gave the solution that they have to provide a clear way of allocating slots at the airport so that we do not have discrimination on the new entrant.”

He noted that while there could be fears that the coming together of the two entities might not necessarily create a major imbalance as the two are already State-owned.

“There is a misconception in terms of saying that the consolidation is a merger. But this is a mere consolidation as per the Competition Act,” he said.

“A merger leads to a change of control. In this case, the State is in control of these two entities being consolidated. Control is when you have 50 plus one of the shares of the two companies coming together or you have veto powers in terms of all the investments that are being made and strategic decisions being taken.”

Transport Chief Administrative Secretary Chris Obure said the local aviation industry still has room for more players, adding that the Bill aims at addressing the sector’s ability to compete with aviation sectors in Africa and the Middle East.

“The scope available in this sector is huge,” he said. “What we are worried about is at the national level where we have to compete with airlines which are better equipped. For instance, the aviation systems in the Gulf Region, Ethiopian and even Rwanda, we find it difficult to compete.”

“What we have proposed in the Bill will not kill other operators. The more organised we are at the national level, the more space there will be for other players.”

The Kenya Association of Air Operators (KAAO) noted that the motives of bringing together some aspects of KAA and KQ were ill-informed. In its submissions to the committee, KAAO said Kenya’s airline industry was different from Ethiopia's and those of Middle East countries.