KQ is think­ing about a more in­ti­mate re­la­tion­ship with SAA

Zambian Business Times - - BUSINESS REVIEW -

Kenya Air­ways may cosy up to ri­val South African Air­ways (SAA) as the em­bat­tled com­pa­nies seek to nar­row the gap to the con­ti­nent’s big­gest car­rier, Ethiopian Air­lines En­ter­prise.

The Nairobi-based air­line, sub-Sa­ha­ran Africa’s third largest by pas­sen­ger traf­fic, views a closer re­la­tion­ship with SAA, the num­ber two, as a pos­si­bil­ity amid turn­around ef­forts at the un­prof­itable op­er­a­tors, CEO Se­bas­tian Mikosz said in an in­ter­view.

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."

Kenya Air was taken un­der gov­ern­ment con­trol in Novem­ber af­ter post­ing the big­gest loss in the na­tion’s cor­po­rate his­tory in 2016 and is cut­ting routes and planes to help re­vive earn­ings. SAA, un­der an eighth CEO since 2010, re­ported a sev­enth straight an­nual loss ear­lier in May and is seek­ing emer­gency fund­ing, even as it tar­gets break-even by 2021.

Co-op­er­a­tion be­tween the com­pa­nies could range from a sim­ple code-share agree­ment al­low­ing re­cip­ro­cal ticket sales to a more ex­ten­sive joint-ven­ture ar­range­ment, Mikosz said.

"One of the key com­po­nents of our growth is part­ner­ship," said the for­mer LOT Pol­ish Air­lines chief, who this week reaches his first an­niver­sary at the helm of Kenya Air­ways. The air­line isn’t hold­ing "a sword and a gun" to its ri­vals, but is "here to push things for­ward in a pos­i­tive man­ner", he added.

Smart move

Any agree­ment with SAA would prob­a­bly be a "long way" off and it’s not clear whether SAA would be in­ter­ested, ac­cord­ing to Mikosz. Still, there are strong links be­tween mar­kets served by the car­ri­ers, and there are in­tra-African routes "where it would be smart to do some­thing". Kenya Air may also pur­sue deeper links with Air Mau­ri­tius, with which it al­ready has a code-share ac­cord, and even Ethiopian Air­lines, ac­cord­ing to Mikosz, though the level of com­pe­ti­tion be­tween the two and the prox­im­ity of their mar­kets is such that reg­u­la­tory ap­proval would be much tougher to se­cure. "Just code-shar­ing would be a huge chal­lenge," he said.\

Ethiopian Air­lines is plan­ning to es­tab­lish half-a-dozen in­ter­na­tional off­shoots be­fore the end of 2018, adding to stakes in Malawi Air­lines and Togo-based Asky, as it steps up ef­forts to dom­i­nate mar­kets across the con­ti­nent, CEO Te­wolde Ge­breMariam said ear­lier in May. Kenya Air doesn’t plan to adopt that model, which would re­quire it to be "co-re­spon­si­ble" for run­ning other air­lines without hav­ing full con­trol, Mikosz said by tele­phone on Friday, adding that he would pre­fer part­ner­ships on com­mer­cial terms.

Co-op­er­a­tion 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 traf­fic flows are also rel­a­tively small, ac­count­ing for just 2.4% of the global to­tal in 2017, with the re­gion’s 99.1-mil­lion pas­sen­gers car­ried amount­ing to 30-mil­lion fewer than at Euro­pean dis­count spe­cial­ist Ryanair alone.

"It’s a small mar­ket, so you’re bet­ter off talk­ing to peo­ple rather than just fight­ing them," Mikosz said.

Kenya Air’s fi­nan­cial per­for­mance is "im­prov­ing", but it’s too early to say that the car­rier, 27% owned by Air France-KLM Group, is out of trou­ble, ac­cord­ing to the CEO. "We’re still in a phase of heal­ing our­selves," he said.

SAA didn’t im­me­di­ately re­spond to calls and e-mails seek­ing com­ment.

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