South African Airways and Kenya Airways plan pan-African airline group by 2023

South African Airways (SA, Johannesburg O.R. Tambo) and Kenya Airways (KQ, Nairobi Jomo Kenyatta) have signed a strategic partnership framework agreement to form a pan-African airline group by 2023.

This follows a Memorandum of Cooperation signed two months ago to foster closer cooperation in terms of the exchange of knowledge, expertise, innovation, digital technologies, and global best practice.

In what they termed “a key milestone” towards a pan-African venture, the airlines in a joint statement said they now would work together to increase passenger traffic, cargo opportunities, and general trade.

They expect the partnership to improve the financial viability of both airlines and deliver more competitive pricing for passengers and cargo customers. The alliance will also use the carriers’ respective hubs of Johannesburg O.R. Tambo (South Africa) and Nairobi Jomo Kenyatta (Kenya) to rekindle tourism in both countries following the COVID-19 pandemic. It also includes demand recovery and other cost containment strategies that would aid the recovery of both carriers in an increasingly competitive African airline environment.

Both airlines stated they remained committed to their respective financial turnaround strategies. “One of the pillars to achieve this is coming together and combining assets to provide a more robust and ultimately competitive aviation ecosystem to pursue the commercial viability of both carriers. The partnership will improve the financial viability of both airlines by creating the most formidable air transport connection in Africa,” they said.

The signing of the partnership agreement by the chairmen of both airlines was witnessed by Kenyan President Uhuru Kenyatta and his South African counterpart, Cyril Ramaphosa, on the second day of Kenyatta’s three-day state visit to South Africa.

The airlines said their partnership was aligned with the aspirations of the Africa Continental Free Trade Area Agreement (AfCFTA) which aims to provide a single market for goods and services on the continent.

Speaking at the signing ceremony, Kenya Airways chairman Michael Joseph said the alliance would capitalise on the geographic position of both countries. “The geo-location of the two countries will make the pan-African airline group attractive by creating the most formidable airline group that is expected to take advantage of strengths in South Africa, Kenya, and Africa,” he said.

SAA exited bankruptcy protection on April 30, 2021, thanks to a ZAR10.5 billion rand (USD662.6 million) taxpayer-funded bailout that is to absorb the national carrier’s historical debt burden. The government is currently engaged in a lengthy negotiation process over a sales agreement with a preferred strategic equity partner, the Takatso Consortium, which includes a black-empowerment partner Harith General Partners, and ACMI-specialist Global Aviation Operations (GE, Johannesburg O.R. Tambo).

SAA resumed commercial operations on limited domestic and regional routes on September 23, 2021, but has since made several adjustments to its regional network depending on passenger volumes and incoming revenue. Citing low demand, it has removed Maputo (Mozambique) from its daily schedule from December 1, 2021, and has made adjustments to flights to Accra (Ghana), Kinshasa N’Djili (DRC), and Lusaka (Zambia), citing lower than expected demand, while bookings on two new routes to Lagos (Nigeria) and Mauritius are encouraging, it said.

Kenya Airways is also looking towards the country’s Treasury to settle its USD250 million debt. The Treasury previously guaranteed loans of USD750 million. A recovery- and cost-cutting turnaround plan is being devised in consultation with London-based consultants Steer Group. While South Africa is looking to give up majority state control of its flag carrier, Kenya wants to renationalise Kenya Airways, but the necessary legislation has been delayed by parliamentary processes. The government currently owns 48.9% of the airline.

Kenya Airways has also signed a Memorandum of Understanding (MoU) for strategic cooperation with Congo Airways (8Z, Kinshasa N’Djili) that will see the two national carriers team up in areas of capacity sharing, aircraft maintenance, and training. Included in the two-year agreement is a route and code-sharing provision aimed at expanding the carriers’ domestic, African, and international networks.