Prepared for Free Article on 26/04/2024 at 08:48. Authorized users may download, save, and print articles for their own use, but may not further disseminate these articles in their electronic form without express written permission from Africa Confidential / Asempa Limited. Contact subscriptions@africa-confidential.com.
PREVIEW
Two of Africa's biggest airlines are relaunching this month with longer-term plans to merge their operations
Once African airline giants, massive financial losses and failed government rescue attempts have left Kenya Airways and South African Airways on life support. But both have set out their plans to resume operations in the wake of the Covid pandemic.
Kenya's national carrier last made a profit in 2012. Hit by the pandemic, it resumed domestic flights in July 2020 and international ones a month later. It announced on 23 September discounted ticket prices of up to 30% to most of its destinations as it seeks to boost revenue.
With discussions on the carrier's fate in the final stages following a parliamentary vote in mid-2019 calling for it to be nationalised, its suspension on the Nairobi Stock Exchange (NSE) was extended for a further nine months from April 2021.
However, there are some positive signs for the African airline industry which both flag carriers hope to cash in on.
Despite carrying just 2% of global cargo, African airlines' demand saw the strongest performance in June, recording a 35% increase according to the International Air Transport Association's air cargo market analysis.
Kenya Airways also signed an agreement with Congo-Kinshasa's flag carrier Congo Airways in April to lease them two Embraer E190 jets to boost the latter's domestic operations.
Nationalisation could exempt Kenya Airways from paying taxes on engines, maintenance, and fuel. However, Kenya's high risk of debt distress and a recent IMF loan with fiscal consolidation conditions limiting spending has prompted the Treasury to play down the prospects of nationalisation or another state bailout.
Another strategy being discussed is a cooperation or merger agreement with SAA, which was hit by mismanagement as well as the pandemic.
On 23 September SAA flew its first flight from Johannesburg to Cape Town after 17 months in administration. The airline is one of several state-owned enterprises receiving controversial massive government subsidies. Losses of R26.9bn ($1.8bn) from 2007 to 2019 and the subsequent infusion of government bailouts saw the airline shed routes even before Covid struck.
With initial planned flights to Accra, Kinshasa, Harare, Lusaka, and Maputo, SAA has emerged from bankruptcy after slashing hundreds of jobs with the promise of more investor funds. The government will own 49% of the new airline, while the Takatso Consortium – comprised of Global Aviation and Harith General Partners – will take 51%.
Copyright © Africa Confidential 2024
https://www.africa-confidential.com
