SAA and Kenya Airways moot pan-African airline group
South African Airways (SA, Johannesburg O.R. Tambo) and Kenya Airways have announced their intention to form a pan-African airline group to support each other’s growth and take advantage of their hubs at Johannesburg O.R. Tambo and Nairobi Jomo Kenyatta, and possibly also Cape Town.
In a joint statement, the carriers said they had signed a memorandum of co-operation with “a longer-term view to co-starting a pan-African airline group that in time will enhance mutual growth potential by taking advantage of strengths of the two airlines’ busy hubs”. SAA spokesperson Vimla Maistry told ch-aviation that for now, the partnership would be a commercial one only, with future details still to be thrashed out. “There are no plans at this time for any equity shareholding with Kenya Airways. SAA is currently in an advanced stage of its local strategic equity partner deal.”
However, SAA’s interim chief executive, Thomas Kgokolo, said in the statement that the memorandum would “in time create the most formidable airline in Africa, benefiting from at least two attractive hubs in Johannesburg, Nairobi, and possibly Cape Town”. The next step is for both parties to set up a joint working group to further discuss the memorandum and put in place systems to achieve their jointly stated objectives, he said.
SAA on September 23 restarted commercial operations following a protracted business rescue process that ended with a ZAR10.5 billion rands (USD694 million) state bailout. It is currently negotiating a strategic equity deal with the Takatso consortium that will see the South African government give up 51% shareholding, with a view to further privatisation that would see the government retain a 33% “golden share”.
From SAA’s side, Kgokolo said the understanding with Kenya Airways was part of its broader growth strategy to become a major player in regional travel. “This joint memorandum with Kenya Airways, one of the continent’s strongest and most respected carriers, will do just that. […] Part of SAA’s core remit is to be a significant enabler of business and trade in Africa and it’s through a strategic understanding like this that real progress will be made in advancing South Africa and the continent’s growth,” he said.
Kenya Airways’ chief executive officer, Allan Kilavuka, highlighted the partnership’s significance in turning around the fortunes of both airlines. “The future of aviation and its long-term sustenance is hinged on partnership and collaboration. Kenya Airways’ and South African Airways’ collaboration will enhance customer benefits by availing a larger combined passenger and cargo network, fostering the exchange of expertise, innovation, best practices, and adopting homegrown organic solutions to technical and operational challenges’’.
Kgokolo said the collaboration would assist both airlines in the current and post-pandemic business and travel environment. This, he said, would involve joint recovery and other cost-containment strategies that would aid the recovery of both carriers in an increasingly competitive African airline environment.
Cooperation would also include shared services in route networks, fleet, and capacity deployment and exploring economic, technical, maintenance, repair, and overhaul opportunities to achieve economies of scale. In addition, the envisaged partnership would help improve customer experience by offering a wider range of choices and destinations as well as aid the standardisation of product and service offerings.
The agreement will not preclude either airline from pursuing commercial co-operation with other carriers within their current route network strategies, the statement read.
As reported, Kenya’s government has stated its intention to nationalise Kenya Airways but a draft law that allows the state to take over the 44-year-old airline has been delayed in parliament. Kenya Airways’ stock was suspended from trading on the Nairobi Stock Exchange on July 3, 2020, in anticipation of the planned nationalisation following the publication of the National Management Aviation Bill 2020 on June 18, 2020. Kenya Airways is 48.9% owned by the government, with a group of 10 lenders holding 38.1%, Air France-KLM 7.8%, employees 2.4%, and others at 2.8%. The airline’s liabilities outstripped its assets by KES73.8 billion shilling (USD672.3 million) by June 30, 2021. It posted a net loss of KES11.48 billion (USD104.36 million) during the six months to June 30, 2021.
Editorial Comment: Updated with more comments from SAA spokesperson Vimla Maistry. – 28.09.2021 – 10:59 UTC