Are Kenya and SA air­lines cosy­ing up?

African car­ri­ers are un­der pres­sure from Gulf op­er­a­tors and Turk­ish Air­lines

The East African - - BUSINESS - By KAYE WIG­GINS Bloomberg

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.”

Heal­ing phase

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

Pic­ture: File

A Kenya Air­ways jet loads up at the Jomo Keny­atta In­ter­na­tional Air­port in Nairobi.

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