Kenya Airways/KLM Alliance
In December 1995 the Kenyan government accepted in principle KLM
Royal Dutch Airlines' bid to purchase 26% of the shares in Kenya Airways.
The alliance with Kenya Airways allowed KLM to add an African presence to its wide ranging
network of alliances.
The shares were purchased for US $26 million cash. KLM also agreed
to provide Kenya Airways with US $3 million worth of technical and service
At the time of KLM's investment in Kenya Airways, KLM also entered into
a shareholder's agreement with the Kenyan government. This agreement
contains provisions to protect the level of KLM's interest in Kenya Airways
at 26% of the issued share capital. KLM also agreed not to dispose
of any of its shares in Kenya Airways for at least five years. The
shareholders agreement contains certain other important provisions:
Kenya Airways and KLM also entered into a comprehensive Cooperation Agreement
with a Mission Statement: "we connect the world". The Cooperation
Agreement sets out the two airlines' plans for the future and the means
by which they intend to work together to develop a world-wide network with
Nairobi as one of its hubs. The aim is to provide a seamless service
to customers throughout the network.
KLM will appoint two Directors to the Board of Kenya Airways. The
Board of Directors' membership consisted of eleven persons in March, 1996.
As long as the Co-operation Agreement (see below) remains in force, the
Board of Kenya Airways may not make any major strategic decisions, such
as new aircraft acquisitions or material changes to Kenya Airways' route
network, without the prior approval of the KLM-appointed Directors.
KLM has the power to nominate future candidates for the positions of Managing
Director and Finance Director for Board approval.
The guiding principles of the Cooperation Agreement are designed to
ensure that both airlines benefit from the Agreement: the "win-win"
principle. The key objectives of the Cooperation Agreement may be summarized as:
An Alliance Committee was formed to ensure that the objectives of
the Cooperation Agreement are achieved in a timely manner.
Increasing each airline's scope for offering profitable air transportation
services between Africa and Europe, North America, the Middle East and
Asia. This is to be achieved by combining route networks with the
objective of providing seamless service to passengers.
Accessing new markets in sub-Saharan Africa and other regions.
Achieving economies through sharing resources such as sales and marketing,
station and ground facilities, flight equipment, maintenance and purchasing
(including insurance, fuel and aircraft).
Integration of routes and systems and development of closer management
Making Kenya Airways the pivot of KLM's network in sub-Saharan Africa
and thus introducing Kenya Airways to KLM's global alliance.