Aviation: African airlines fly to the Gulf seeking alliances, survival in crowded airspace

qatar emergency carrier airlines

African airlines are seeking partnerships and alliances as they try to remain afloat, with the Middle East carriers becoming the likely suitors as they seek to turn around their fortunes while improving cost efficiencies.

This comes as the latest International Air Transport Association (IATA) report released last month showed that Africa continues to be the weakest region in aviation, a trend that has persistent over the past four years.

“African airline losses have shrunk as commodity prices rose and load factors improved. However, their break even load factors are relatively low, as yields are a little higher than average despite the lower costs. However, few of the airlines are able to achieve adequate load factors, which average the lowest globally at 61.5 per cent in the first six months of 2018,” IATA said.

On average, African airlines are projected to make a loss of $100 million, as they did last year, with per passenger loss narrowing to $1.5 million from $4.6 million two years ago.
On the other hand, the Gulf carriers are expected to make a profit of $1.3 billion this year, up from an average of $1 billion they registered in 2017, while their passenger revenue will grow to $5.89, up from $4.81 last year making them attractive partners for the African airlines.

Regional alliance
Last week, it emerged that Air Mauritius is courting Kenya Airways (KQ), South African Airways (SAA) and RwandAir over the formation of a new regional alliance.
It is still not clear how this alliance will work but if successful will be a gamechanger that will allow these four carriers to leverage their combined size to improve unit-cost efficiencies.

This development comes at a time Nigeria is also competing with South African Airlines for attention from Gulf carriers after announcing the relaunch of a new national airline at the Farnborough Air Show in the United Kingdom last week.

Ethiopian Airlines is also said to be in the race to acquire shareholding in the Nigerian airline as it seeks to protect its West African hub, a development that is expected to dent the fortunes of both Kenya Airways and Rwandair, which have made West Africa a key market over the years.

However, it is the race to get a stake in the Nigerian airline — whose home country is the continent’s most populous states and West Africa’s largest air travel hub — that will now leave Kenya Airways and Rwandair looking elsewhere for revenue.

This comes at a time African airline traffic grew by 7.5 per cent, yet capacity rose by only 3.6 per cent, according to IATA, an indicator of the demand for more capacity on the various routes in the market.

‘Nigerian project’
Nigerian Aviation Minister Hadi Sirika met with Qatar Airways chief executive officer Akbar Al-Baker, a meeting where he made reference to the airline boss as a “potential partner or investor.”

Mr Sirika also met the chief executive officer of Ethiopian Airlines Tewolde GebreMariam.
“We expect to face competition over the Nigerian project from Qatar Airways,” Mr Tewolde told Bloomberg.

The Nigerian airline is expected to be run as a public-private partnership and should become profitable in three years, with the government holding a 5 per cent stake.
Qatar Airways, one of the bidders, currently has stakes in carriers including British Airways owner IAG SA and Latam Airlines Group SA.

Ethiopian Airlines, also a front runner already runs Malawi Airlines and Togo-based Asky Airlines. It is also angling for equity stakes in Zambia, Mozambique, Chad and Guinea by the end of this year.

Last week it announced that it would be acquiring a 20 per cent stake in Eritrean Airlines and will also be helping to run existing operators in Equatorial Guinea and the DR Congo.
African and Asian routes

As it is, KQ is already facing strong competition on its African and Asian routes as the average fare declines due to competition.

In its annual report for the year ended December 2017, the national carrier stated that more than half the revenue decline was the result of the drop in average fares on its routes.

“This downward trend in fare is the result of increased competition and overcapacity on ‘Intra-Africa’ and ‘Africa-Asia’ traffic flows,” said KQ in its financials.

Key competitors that KQ must now contend with on these traffic flows include Ethiopian Airlines, RwandAir, Qatar Airways and Emirates.

Ethiopian’s bid for the Nigerian national carrier, if successful will make the completion worse on a route KQ flies more than four times a week.
EWT, operates a West African hub from Lome, Togo where it has a domestic and regional partnership with Asky Airlines.

Revenue optimisation
“The talks between Emirates Airline and SAA, which have been going on for some months, are being facilitated by our embassy in Pretoria. The airline has also been holding separate talks with Etihad Airways,” the UAE’s ambassador to South African Mahash Alhameli told South African newspaper City Press.

However, SAA has denied that it was seeking the Gulf airlines as strategic equity partners only confirming that it has had preliminary talks with the Kenyan national carrier, Turkish Airways, Air Mauritius, Emirates, Qatar Airways, United Airlines and Singapore Airlines.

“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. We have not discussed any possibility of them investing in SAA as part of the strategic equity partner process,” SAA spokesperson Tlali Tlali said a statement, adding that these meetings have taken place over the past six months as the airline seeks to explore mutually beneficial opportunities to expand the network.”

Kenya Airways chairman Michael Joseph confirmed in April that it had held discussions with other airlines on joint venture partnerships.

Source: businessdailyafrica.com

0 0
Article Tags:
Article Categories:
ATQ News ArchiveAviation

Leave a Reply

Your email address will not be published. Required fields are marked *