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South African Airways, Kenya Airways Sign Strategic Partnership
Kenya Airways and South African Airways this week signed a strategic partnership framework that may be the pathway to co-starting a Pan-African airline group by 2023. This follows the September signing of a memorandum of cooperation between the two national carriers. This week’s signing was undertaken by the chairmen of both airlines during a state visit to South Africa by Kenya’s president. Both the Kenyan president and the South African president witnessed the event held in Johannesburg.
“The Strategic Partnership Framework will improve the financial viability of both airlines by creating the most formidable air transport connection in Africa by benefiting from at least two attractive hubs of Johannesburg and Nairobi. It will ignite the Kenya and South Africa tourism circuits, which account for significant portions of the respective country’s GDP,” said South African Airways Chairman John Lamola.
“This cooperation aligns with Kenya Airways’ core purpose of ‘Contributing to the sustainable development of Africa’ and is based on mutual benefits,” Kenya Airways Chairman Michael Joseph said in a statement. “It will increase connectivity through passenger traffic, cargo opportunities, while enhancing the implementation of the Africa Continental Free Trade Area Agreement. The geolocation of the two countries will make the Pan-African Airline Group attractive by creating the most formidable Airline Group that is expected to take advantage of strengths in South Africa, Kenya, and Africa.”
The Africa Continental Free Trade Area Agreement Joseph referenced aims to provide “a single market for goods and services, facilitated by movement of persons and goods to deepen the economic integration and prosperity of the African continent.”
Both airlines have suffered during the coronavirus pandemic and have implemented financial turnaround strategies to better their business positions. According to the announcement, the strategic partnership framework is “one of the pillars to achieve this is coming together and combining assets to provide a more robust and ultimately competitive aviation ecosystem to pursue the commercial viability of both carriers.”
South African Airways had been in a serious financial position for several years prior to the pandemic and went into business rescue in December 2019. All South African Airways commercial flights ceased operation in May 2020 and it was only on 23 September that the airline recommenced commercial domestic flights. A strategic equity partner for South African is currently undergoing due diligence and, according to local outlet News24, is expected to invest 3 billion rand ($190 million) in the airline over a three-year period.
Kenya Airways Chief Executive Officer Allan Kilavuka last week acknowledged that the airline was in talks with the Kenyan Government to settle $250 million in debt accrued during the pandemic. The Kenyan government is a 48.9% stakeholder in the airline though there have been plans to renationalize the airline in recent years. From a financial standpoint, Kenya Airways has not made a profit since 2012.
The strategic partnership framework signed this week will hopefully go some way to fulfilling Mr. Lamola’s vision of improving “the financial viability of both airlines by creating the most formidable air transport connection in Africa by benefiting from at least two attractive hubs of Johannesburg and Nairobi. It will ignite the Kenya and South Africa tourism circuits, which account for significant portions of the respective country’s GDP.”
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