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- May 11, 2013
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Air Mauritius, South African Airways, RwandAir and Kenya Airways want economies of scale to boost efficiency.
Four African airlines plan to launch the first African Civil Aviation Alliance before March next year, to break the stranglehold of Ethiopian Airlines on the continent and boost their fortunes through innovative ways.
Air Mauritius, South African Airways, RwandAir and Kenya Airways hope to use the alliance to achieve the "much needed economies of scale" which would accord them improved efficiency and collaborations.
The continent's aviation sector has been dogged by challenges, including high taxes, airfare and the cost of jet fuel; poor airport infrastructure; international competition mostly from Gulf carriers, and inward-looking aviation policies which have pushed three of the four (except Air Mauritius) into a loss-making territory for more than four years in a row.
The four airlines have been discussing the alliance for over 15 months, and are currently putting final touches onto the deal.
It is expected that the arrangement will help them cut back on costs, improve synergy between hubs and expand code-sharing on several routes, making them more competitive than the continent’s top carrier, Ethiopian Airlines and foreign carriers making inroads into the continent.
The four are expected to formally announce the joint venture before the New Year.
Efforts to get a comment from Kenya Airways and RwandAir were unsuccessful as their representatives did not respond to e-mails from The EastAfrican.
Hub-and-spoke networks
In April, Kenya Airways chairman Michael Joseph said the airline was holding discussions with other carriers on a joint venture but did not offer any timelines or details.
“We have opened discussions with other airlines on joint venture partnerships. We have started discussions with South African Airways that could see us join forces on aircraft repairs and route joint ventures. So far, we have discussed issues of mutual concern. For example, we fly to similar destinations in Africa, so there’s a possibility we could share those routes,” said Mr Joseph.
The discussions which are complete, are hinged on how this alliance will work on a range of city pairs, route code shares, and joint use of lounges, maintenance and repair centres, and the co-ordination of their frequent flyer programmes.
“The drive for this alliance is partly pushed by the need to have the four airlines operate hub-and-spoke networks as they seek to enhance the demand for their respective networks, and increase their market power, especially at their hub airports,” a source with knowledge of the alliance said.
Kenya Airways is already working on a plan with its host, the Kenya Airports Authority which will see it take charge of the Nairobi hub. South African Airways, RwandAir and Air Mauritius already enjoy this exclusivity in their Johannesburg, Kigali and Port Louis hubs.
“Once this comes into effect, we will see deeper co-operation between the four airlines on all aspects of their business. We are going to see realignments in terms of how they compete on both overlapping non-stop routes, and overlapping connecting routes,” The EastAfrican was told.
Codeshare
Already, Kenya Airways and Air Mauritius have confirmed the alliance, with the Port Louis-based carrier noting in its last Annual General Meeting that this would allow the parties involved to achieve the much needed economies of scale for each.
“Consultations are ongoing with African airlines including SAA, Kenya Airways and RwandAir for the setting up of the first African alliance. An advantage of these partnerships is to achieve economies of scale for better efficiency and collaborations including shared services and transfer of knowledge. For us, the goal is that Mauritius, becomes a powerful hub in Africa,” Air Mauritius board said at the AGM.
Already, Air Mauritius has expanded its existing codeshare with Kenya Airways into a reciprocal agreement. This allows it to codeshare, as a marketing carrier, on all Kenya Airways-operated flights between Nairobi and Mauritius. Kenya Airways already places its code on Air Mauritius's three times weekly Mauritius-Nairobi flights.
For Air Mauritius, the added connectivity to the African mainland via Nairobi and Kigali would also allow it to further its overall goal of developing its main Port Louis hub, the Mauritius Sir Seewoosagur Ramgoolam International Airport into a key conduit for Africa-Asia and Africa-Oceania traffic.
On the flipside, for Kenya Airways, which began its direct nonstop flights to New York, this would offer it clientele, based mainly on the fact that Mauritius is one of the World’s top tourist destination, feeding through its Nairobi hub.
“We have had purely commercial discussions with all these airlines with regards to code sharing, interline, cargo business as well as possibilities of these airlines taking some of our excess flight deck and cabin crew,” SAA spokesperson Tlali Tlali said a statement, adding that the airline seeks to explore mutually beneficial opportunities to expand the network.
On Tuesday, SAA signed a deal with Emirates to expand an existing codeshare agreement, in a rare bright spot for the cash-strapped airline. The state-owned carrier, which has not made a profit since 2011, and received its $350 million government handouts, said the deal would see the two airlines leverage each other’s route networks, cargo services and flight schedules to boost passenger flows.
“The expansion of our commercial relationship will further strengthen key focus areas of the implementation of our turnaround plan,” said SAA chief executive Vuyani Jarana.
Four top African airlines to take on Ethiopian