Kenya Airways and South African Airways (SAA), two of Africa’s financially challenged state-owned carriers, have come together under a new strategic partnership to create the new “Pan African Airline Group” by 2023.
Under the pact, which was signed on Tuesday, the airlines will “work together to increase passenger traffic, cargo opportunities, and general trade.” In addition, they anticipate it will improve passenger connectivity and the “financial viability” of both carriers. The depth of the tie up, which is called a “strategic partnership” but referred to as the airlines “coming together and combining assets,” is unclear but resembles an immunized joint venture where they are able to coordinate on numerous commercial levels, including scheduling and pricing.
“With South African, we want to see how we can cover the African continent very effectively,” said Kenya Airways Group Managing Director and CEO Allan Kilavuka on the then-tentative partnership in October. “This is going to be, in my opinion, one of the most fundamental developments in African aviation for a long time to come.”
Kilavuka added that both Kenya Airways and SAA were open to other “joiners” — or other airlines — in their partnership.
But the question is whether two loss-making, state-owned airlines can come together to create an African powerhouse. Neither airline has turned a profit in about a decade, and both have taken tens of millions of dollars in government aid during and before the crisis. And in recent years, neither was known for being an innovative or stand out carrier in the market.
“They have deep in their DNA extreme professionalism and competence,” said Aviado Partners Managing Director Shakeel Adam. “Kenya Airways and South African Airways are two airlines that should survive, but they have to figure out how.”
In the past, both Kenya Airways and SAA were strong carriers, but poor management and other challenges have weakened both and allowed competitors, namely Ethiopian Airlines, to expand, he said. Adam called the partnership “very interesting,” but with the caveat being that few details of exactly what it entails have been disclosed.
A joint venture, as suggested by both airlines’ statements, could create significant commercial benefits if implemented well. However, Adam warned that Kenya Airways and SAA must make sure their basic agreements — including an interline and codeshare — are solid before embarking on a broader immunized pact.
“Being together and cooperating, we [can] consolidate the market,” said Kilavuka in October. He added that the pact will boost, among other things, growth, unit costs, efficiencies, and connectivity.
Kenya Airways and SAA face stiff competition in creating a pan-African network. Ethiopian — the continent’s largest carrier by far — has built a formidable African franchise at its Addis Ababa base, though it is unclear how its home country’s internal unrest will affect the airline’s recovery. And RwandAir, which benefits from a significant investment from Qatar Airways, has similar ambitions to turn its Kigali base into a major connecting point for African air traffic. Whether Kenya Airways’ Nairobi hub and SAA’s Johannesburg hub can be transformed into regional mega hubs remains to be seen.
In addition, neither Kenya Airways nor SAA made any mention of how the partnership could impact their alliance memberships with SkyTeam and Star, respectively. Historically, cross-alliance partnerships have been discouraged — if not outright barred — at both alliances.
Kenya Airways is scheduled to fly just 44 percent of its 2019 capacity in the fourth quarter, while SAA just 4 percent — it only resumed flights in September after an 18-month suspension — according to Cirium schedule data. For comparison, Ethiopian plans to fly 65 percent and RwandAir 57 percent of their 2019 capacity.