Are Kenya and SA airlines cosying up?
African carriers are under pressure from Gulf operators and Turkish Airlines
Kenya Airways could cosy up to rival South African Airways as the embattled companies seek to narrow the gap with the continent’s biggest carrier, Ethiopian Airlines.
The Nairobi-based airline, subsaharan Africa’s third largest by passenger traffic, views a closer relationship with SAA, the Number 2, as a possibility amid turnaround efforts at both unprofitable operators, chief executive Sebastian Mikosz said in an interview.
Mr Mikosz said he has spoken with Peter Davies, the restructuring expert recruited by the South African carrier last year, to see “what we can do together.”
KQ was taken under government control in November after posting the biggest loss in the nation’s corporate history in 2016 and is shedding routes and planes to help revive earnings. SAA, under its eighth CEO since 2010, reported a seventh straight annual loss this month and is seeking emergency funding as it aims to break even by 2021.
Cooperation between the national carrier companies could range from a simple code-share agreement allowing reciprocal ticket sales to a more extensive joint venture arrangement, Mr Mikosz said.
“One of the key components of our growth is partnership,” said the former LOT Polish Airlines chief, who has been at the helm of the Kenyan carrier for a year now.
Kenya Airways is not holding “a sword and a gun” to its rivals, but it is “here to push things forward in a positive manner,” he added.
Any agreement with SAA would probably be a “long way” off and it is not clear whether the Johannesburgbased company would be interested, Mikosz said.
Still, there are strong links between markets served by these carriers, and there are intra-african routes “where it would be smart to do something.”
Kenya Airways may also pursue deeper links with Air Mauritius Ltd., with which it already has a code-share accord, and even Ethiopian Airlines, according to Mikosz, although the level of competition between the two and proximity of their markets is such that regulatory approval would be much tougher to secure.
“Even code-sharing would be a huge challenge,” he said.
The Addis Ababa-based Ethiopian is planning to establish half a dozen international offshoots before the end of the year, adding to its stake in Malawi Airlines and Togo-based Asky, as it steps up efforts to dominate the market across the continent, CEO Tewolde Gebremariam told Bloomberg this month.
KQ does not plan to adopt that model, which would require it to be “co-responsible” for running other airlines without having full control, Mr Mikosz said, adding that he would prefer partnerships on commercial terms.
Cooperation between African carriers is being partly driven by the pressures they face from the big three Persian Gulf operators and Turkish Airlines, which have captured a major slice of the market.
The continent’s air traffic flow is also relatively small, accounting for just 2.4 per cent of the global total last year, with the region’s 99.1 million passengers carried being 30 million fewer than at European discount specialist Ryanair Holdings Plc alone.
“It is a small market, so you are better off talking to people rather than just fighting them,” Mr Mikosz said.
Kenya Airways’ financial performance is “improving,” but it is too early to say that the carrier, which is 27 per cent owned by Air France-klm Group, is out of trouble, according to the CEO. “We are still in a phase of healing ourselves,” he said.
SAA did not immediately respond to calls and e-mails seeking comment.
Africa is a small market, so you are better off talking to people rather than just fighting them.” Sebastian Mikosz, CEO Kenya Airways
A Kenya Airways jet loads up at the Jomo Kenyatta International Airport in Nairobi.