SAA seeks R23m from Kenya Airways in bitter airline revenue dispute - TimesLIVE

South African Airways (SAA) is seeking to recover almost R23m from Kenya Airways, accusing the East African carrier of departing from agreed revenue-sharing arrangements and refusing to repay money allegedly overpaid under a codeshare agreement.

The dispute involves $1.37m (R22.5m) in allegedly unpaid airline surcharges and a further $256,342 which SAA claims Kenya Airways received through incorrectly calculated commissions.

The state-owned airline maintains that Kenya Airways changed the way it calculated passenger surcharges without adhering to the methodology agreed between the two carriers, while an audit allegedly exposed irregularities in the calculation of commissions.

SAA approached the Gauteng high court in Johannesburg in October for permission to institute legal proceedings against Kenya Airways through edictal citation, a process that allows court papers to be served on a defendant outside South Africa.

The application, brought on an ex parte basis, seeks permission to serve the Kenyan airline through email or alternatively through the South African High Commission in Nairobi. The substantive action will seek repayment of the disputed amounts, together with interest and legal costs.

In its founding affidavit, SAA’s attorney Nkosingiphile Khoza sets out the contractual relationship between the airlines and the basis for the claims.

“Together, the SPA and the Codeshare Agreement with Exhibit E (collectively the ‘agreements’) obliged the parties to adopt a sector-based approach to filing YR/YQ surcharges, in accordance with industry practice,” reads the affidavit.

The Special Prorate Agreement, concluded in November 2021 and subsequently extended until November 2024, provided for the airlines to handle passengers travelling on one itinerary and share revenue from ticket costs.

The agreement also regulated how airline-imposed surcharges were to be calculated and settled. SAA maintains that the parties had agreed to use a sector-based methodology, with the amounts billed according to the relevant flight sectors.

However, SAA alleges that Kenya Airways unilaterally departed from this arrangement in October 2024, when it confirmed that it had changed its methodology from sector-based to journey-based calculations.

“However, on 9 October 2024, KQ confirmed that it had changed its YR/YQ filing methodology from sector-based to a journey-based approach to filing. This resulted in a straight rate prorated approach of YR, whereby the total YR amount for the entire journey is prorated across all sectors,” reads the affidavit.

SAA argues that the change was contrary to the agreements, which required the surcharges to be settled on a sector-based, fixed-rate basis as filed by each airline with the Airline Tariff Publishing Company.

The airline says Kenya Airways began rejecting its surcharge billings from approximately January 2023, relying on the journey-based methodology instead of the contractual arrangement.

According to SAA, this resulted in $1,116,403 in unpaid surcharges relating to codeshare sectors between July 2022 and May 2024.

“Contrary to the agreed methodology, KQ unilaterally applied a journey-based proration system for YR surcharges, whereby the total YR amount for the entire journey was prorated across all sectors rather than being billed at the sector-specific fixed rates filed in ATPCO,” it reads.

Kenya Airways. Picture: REUTERS SAA further argues that the contractual arrangements required Kenya Airways to collect and pay over surcharges filed by either airline for the use of its network when passengers travelled on tickets issued by the other carrier.

The second claim relates to alleged overpayments of codeshare commissions.

Under the agreement, flight coupons issued through the codeshare arrangement attracted a 7% commission payable to the marketing carrier. These commissions were calculated monthly through credit memos.

However, SAA says an audit of the credit memos raised between August 2022 and May 2024 revealed that incorrect passenger data had been used in calculating the amounts payable to Kenya Airways.

The airline alleges that the commission was calculated using 83 inward-billing data entries instead of 706 outward-billing entries, resulting in Kenya Airways receiving more money than it was contractually.

“The codeshare commission was calculated based on 083 data (inward billed by KQ) instead of 706 data (outward billed by SAA),” it reads.

SAA argues that the incorrect calculations resulted in an overpayment of $256,342 and that Kenya Airways was unjustifiably enriched at its expense.

It says it notified Kenya Airways of the overpayments and requested authority to debit the disputed amounts. However, the airline alleges that Kenya Airways failed or refused to reimburse it.

“SAA notified KQ of the overpayment and requested authority to debit KQ for the overpaid amounts, however, KQ has failed, alternatively refused to reimburse SAA for the overpayments,” the affidavit states.

The two claims bring the amount SAA is pursuing to $1,372,745, excluding interest and legal costs.

The dispute has been brewing for several years, with SAA maintaining that it attempted to resolve the disagreements through negotiations and the dispute resolution mechanisms contained in the agreements.

The Codeshare Agreement provided for disagreements to be escalated between the airlines’ chief executives before being referred to arbitration if no resolution could be reached.

SAA says the parties engaged in extensive bilateral negotiations from December 2022, involving senior management, chief financial officers and their respective chief executives.

On June 23 2025, SAA formally declared a dispute under the agreement and called on Kenya Airways to agree to the appointment of arbitrators.

Its attorneys subsequently wrote to Kenya Airways on August 26 2025, requiring the airline to respond by August 29.

However, SAA alleges that Kenya Airways failed to respond to the dispute declaration, nominate or agree to an arbitrator, or participate in the arbitration process.

“KQ failed to respond to the dispute declaration, to nominate or agree to an arbitrator, or to engage with the arbitration process in any way,” the affidavit states.

SAA argues that Kenya Airways’ conduct amounted to a repudiation of the dispute resolution mechanism and entitled it to approach the South African courts for relief.

The airline is relying on provisions in the Codeshare Agreement stipulating that disputes between the parties are governed by South African law and that the South African courts have exclusive jurisdiction over proceedings arising from the agreement.

It is now asking the court to authorise service of the legal proceedings on Kenya Airways through four email addresses belonging to its employees, alternatively through the South African High Commission in Kenya.

SAA wants Kenya Airways to be given 30 days from service of the citation and particulars of claim to indicate whether it intends defending the action, followed by 45 days to deliver its plea.