Local airlines accuse oil marketers of arm-twisting to secure tenders

November 16, 2018
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The management teams of Kenya Airways, Safarilink and Fly540 told the Committee that the petition emanated from their decision not to award the petitioners business/FILE

, NAIROBI, Kenya, Nov 16 – Top airlines in the country have called on the National Assembly Committee on Energy to dismiss a petition in which two leading oil marketers allege that there are unlicensed operators engaging in the supply of jet fuel.

The management teams of Kenya Airways, Safarilink and Fly540 told the Committee that the petition emanated from their decision not to award the petitioners business and said they will not be forced into doing business with them.

“The petitioner has approached Safarilink for business, and the he has also lost some business with KQ.  Basically the petitioner wants our business, this is a red-herring where you are disparaging the other people who have ERC certification – except the two ERC dismissed – but everyone else we deal with is licensed by ERC,” Safarilink CEO Alexi Avedi stated.

KQ Chief Finance Officer Hellen Mwariri on her part explained that the genesis of the matter was on September 21 when the petitioner told the national carrier that they need to increase their fuel prices by Sh5.50 per litre by September 30 failure to which they will reduce their volume.

“So come October 1, we were not going to fuel 35 per cent of our network. So we went out and asked our current fuellers what is it that they can give us, so we gave Oil Libya 15 per cent and ASM 20 per cent to cover ourselves, that is where our problem started, because this basically arm-twisting the airline because you have the muscle, it is not right and it is not fair because that basically cripples our business.”

They made this appeal even as it emerged that Fly540 and Kenya Airways had contracted dealers who are not licensed by the Energy Regulatory Commission to supply jet oil in the county.

Mwariri defended ASM Kenya by producing an ERC certification. She added that the firm had 10 per cent of the all the international in 2018 adding that it is highly recommended by African Airlines Association (AFRAA).

Fly540 CEO Nixon Ooko on his part said Pacific has been their sole supplier for the last five years.

However, ERC Director-General Pavel Oimeke last week told the House Committee that Pacific and ASM are not licensed to operate as exporters and wholesalers of the commodity.

The Committee learned in Thursday’s deliberation that some of big marketers such as Oil Libya or KenolKobil using enter into agreements with the ‘briefcase suppliers.’

Safarilink CEO explained that some firms in the aviation industry have been known to enter into agreement, he called ‘hospitality’ where a firm which has infrastructure on the airport agrees to host a smaller firm which has won a bid to supply airlines with oil.

The smaller firm will act as agent of the host in which it uses its infrastructure to meet its commitments while the ‘host’ gets an agreed payoff from the business.

The local airlines managers explained that due to the competitiveness in the aviation industry it is not uncommon for the market leaders and the small players to enter separate bids during tendering but at the end of the process to find them working together because the small industry player placed a lower bid and won the tender.

The petition presented by Gulf Energy Chief Operations Officer Pius Omollo and Bakri International Energy Company Aviation Manager Agoi Vedell on behalf of the licenses oil marketers had named ASM and Pacific alongside World Fuel Services and Sky Tanking as illegal importers.

ERC cleared the World Fuel Service and Sky Tanking.

MPs led by Committee Chairman David Gikaria (Nakuru Town East), Abdikhaim Osman (Fafi) and Elisha Odhiambo (Gem) put the manager to task over the laxity in which they were treating the quality and safety of any product dispensed at the airport.

“We are concerned that Pacific they earn money, they make profits and they are supposed to pay taxes in this country, and then out of that little money it is not taxed because they are not known. It becomes an issue for this country because we don’t want anybody to operate without paying taxes,” Gikaria stated as he hinted that they will also invite the Kenya Revenue Authority to shed light on possible tax fraud and tax evasion allegations.

This is after Fly540 CEO Ooko and his Safarilink counterpart explained that the quality of the oil is never compromised because it is pumped out the same hydrant from KPC depot.

“The matter of safety here is being over-dramatized being of all the agencies that are involved in the testing including also Kenya Bureau of Standards (KEBS). So any batch that comes into the country is brought in by the same consignment nobody brings independently their fuel,” he said.

“When it comes to safety, if there is a batch which is contaminated it will be for all marketing company, who will be buying that particular batch,” Ooko explained.

The petitioners asked the National Assembly to investigate the massive influx of illegal oil marketers in the country with a view to eliminate them or cause them to be licensed in order to operate lawfully.

They explained that oil marketing companies have incurred massive losses due to the fact that the local oil marketers have invested in infrastructure and the pricing of the jet fuel is based on the open tender system as stipulated in the law.

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