Jump to navigation

Kenya

New Pan-African airline aims to take off in 2023

Committed investors and political will are key to success of proposed tie-up between Kenya Airways and South African Airways

Officials in Nairobi and Johannesburg are working with new investors for the launch next year of the biggest airline alliance in Africa after two years of crashing revenues in business travel and tourism.

Regional governments and the World Bank are predicting a modest upturn in both areas this year. In the medium term, the aviation sector in Africa, the second biggest continent after Asia, is forecast to be one of the fastest-growing in the world.

But battered by the Covid-19 pandemic, African airlines have projected combined losses of $8.2 billion in 2021. That's $2bn less than the losses in 2020.

The Strategic Partnership Framework signed by Kenya Airways (KQ) and South African Airways (SAA) last November was seen by policy-makers as a rational response to the financial pressures hitting the sector.

It was meant to lay the basis for a new continental airline, making the most of bases in two of Africa's busiest commercial hubs, Nairobi and Johannesburg.

So far, neither company will be drawn on how the merged entity will operate.

Interested investors have been gauging the level of support from the two countries' treasuries which are both struggling with revenue shortfalls and rising debts.

KQ has been trying to cut costs and diversify into cargo and charter flight operations. That enabled it to reduce its losses in the first half of 2021 to 11.48 bn shillings ($104.36m) down from KSh14.32 bn in the preceding six months.

But the carrier accumulated losses of more than KSh127bn over several years, forcing it to apply for a bail-out by the government, which is the biggest shareholder, with 48.9% of the equity.

Plans to fully nationalise the carrier, although approved by the National Assembly in July 2019, were scrapped after the Treasury offered a bail-out programme, taking over KQ's KSh93.4bn debt to suppliers, and providing a further KSh53.4bn in direct support in the fiscal year ending June 2022.

SAA returned to operations in September 2021, after a year's hiatus and a long period in administration. In three years, beginning 2018, SAA reported losses of 16bn rand ($800m). It had received R50bn in government assistance between 2004 and 2020, most of it when Dudu Myeni, a close ally of ex-President Jacob Zuma, chaired the board of directors. The report of the Zondo Commission into 'state capture' said SAA's 'governance quality and effectiveness' were in steady decline from 2012 and the period was marked by fraud and corruption.

The proposed merger to form a Pan African airline could help keep both airlines afloat and widen their reach, through tie-ups with smaller local carriers, and boost their passenger traffic and cargo business (AC Dispatches 4/10/21, On the runway again with sights on a continental carrier). 

Aviation experts however suggest that the merged airline will also have to choose between rival international commercial alliances. KQ is a Sky Team member while SAA belongs to Star Alliance. Analysts also suggest that liberalising the African air travel market holds far better prospects for airlines than mergers. 



Related Articles

DISPATCHES

On the runway again with sights on a continental carrier

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...

READ FOR FREE

By Skype from The Hague

Kenya’s first presidential debate, broadcast live on eight television and 34 radio stations on 11 February, was unlikely to sway an electorate deeply polarised by ethnic and region...


Gauteng for Mbeki

The election of a provincial prime minister may give a foretaste of future politics

The smallest and richest of South Africa’s nine provinces seems certain to give the ruling African National Congress a solid majority at the national and provincial elections on 2 ...


The lockdown finds pushback

The public is starting to tire of one of the world’s strictest restrictions in response to Covid-19 as cracks appear in the political consensus

The armed forces are patrolling the streets to enforce a nationwide curfew from 8pm to 5am as citizens can only exercise between 6am and 9am, and no more than five kilometres from ...


Righting the rigging

Kenya’s Electoral Commission and Western diplomats have responded with a deafening silence to a confidential report on the 28 December elections by the Democratic Development...