South Africans this week visited East Africa with a long-term business proposal that reaffirms Pretoria and Nairobi’s ambition to create a continental airline, smoothen migration policies and promote complimentary trading privileges.
President Cyril Ramaphosa led a business delegation to Nairobi with a promise to enhance business ties to “greater heights” and upend traditional modus operandi.
South Africans have done business in Kenya and the wider region before but they have registered mixed fortunes, with banks succeeding and retail chain stores closing shop.
The new deal, President Ramaphosa and his host Dr William Ruto said, will be hinged on the African Continental Free Trade Area (AfCFTA) agreement, which will help bypass the protectionism that has dogged the regional blocs they belong to – the East African Community and Southern African Development Community.
It will not come cheap
The pan-African airline was a priority on the agenda of the Nairobi meeting. But it will not come cheap, or fast.
The two countries have technical teams working on a partnership between Kenya Airways (KQ) and the South African Airways (SAA). The partnership will first target survivability of both airlines – which have recently seen lean times – by completing each other’s routes as well as focusing on viability by reducing debt exposure.
When both are steady in the skies, they will start shopping for potential investors to build a continental carrier.
Visa removal
The announcement by President Ramaphosa of the removal of visa requirements for Kenyans beginning January 2023 for a maximum of 90 days annually gave impetus to the airline deal, opening doors to Kenyan travellers to South Africa. This is expected to directly help the two ailing airlines get more traffic. In the past, South Africa’s insistence on single-entry business visas discouraged travel.
“We have discussed the issue of visas between South Africa and Kenya, with a view to allowing Kenyans to visit South Africa on a visa-free basis. This will officially start on January 1, 2023 and it will be available to Kenyans for a 90-day period per year,” President Ramaphosa said.
John Rocha, South Africa’s chief director of Trade Invest Africa, said the decision to remove the visa requirement will lead to an increase of Kenyan citizens flying to South Africa and vice versa.
“It is one way of boosting the financial positions of the two institutions,” Mr Rocha told The EastAfrican on Wednesday after holding trade talks with Kenya’s Trade Principal Secretary Johnson Weru.
Airline partnership
KQ and SAA first signed a strategic partnership framework in South Africa in November 2021. KQ chairman Michael Joseph, who was present at the signing of the deal between President Ramaphosa and former Kenya President Uhuru Kenyatta, at the time said the partnership would increase connectivity through passenger traffic and cargo, while enhancing implementation of the AfCFTA.
“The geo location of the two countries will make the pan-African airline attractive by creating the most formidable airline that is expected to take advantage of strengths in South Africa, Kenya and Africa,” he said.
Ferrying cargo
This week, Joseph told The EastAfrican that KQ was already ferrying cargo on behalf of SAA as part of the deal.
“It’s good for KQ and we have a code share. Plans with SAA are still work in progress but we are flying freight for them,” he said.
The deal, if successful, will improve the financial base of the two carriers by cutting costs, increasing the size of the available fleet through code share, and potentially lead to a new airline group by the end of 2023, according to KQ Chief Executive Allan Kilavuka.
“The partnership is critical to the realisation of Single African Air Transport Market and the African Continental Free Trade Area initiatives, both of which will open up Africa’s skies, boost trade, tourism and promote the growth and value of aviation throughout the continent,” Kilavuka said.
Implementation of the Amsterdam-Johannesburg cargo block space agreement has yielded in excess of $800,000 in revenues, after adoption of Cargo Special Prorate Agreement, according to the officials.
Rocha is confident that despite financial struggles by the two airlines, the partnership signed last year and Wednesday’s removal of visa travel requirements for Kenyan travellers will be help in their turnaround.
“Within the framework of strengthening trade and investment, the question of freight, movement of people and goods – be it by air, sea or rail – becomes very important. And it is one of the items on the agenda.
Partnership agreement
Last year a partnership agreement was signed between the two airlines and we are assessing the progress.”
Kilavuka said the pan-African partnership will give customers “the best possible benefits and connectivity for the growth of Africa.”
“The expected benefits of the pan-African approach will lead to the creation of the most formidable airline group in Africa, benefiting from two attractive hubs with the largest traffic – Nairobi and Johannesburg – and an opportunity to expand to West Africa such as the proposal for Air Senegal under consideration,” the Kenya Airways CEO said.
“The airline group will enhance related Kenya/South Africa tourism circuits, which sectors account for eight percent and three percent of respective countries’ GDPs.”
Other than achieving enhanced diplomatic and commercial relations between the two large economies, the partnership is also expected to see an improved customer experience for travellers from the two regions.
“The KQ/SAA will benefit from economies of scale: shared services such as maintenance, procurement, systems and jointly expand on cargo business.
“Through the codeshare agreement with Kenya Airways, SAA’s valued customers will gain new travel choices to markets across East Africa via Kenya’s extensive network and hub in Nairobi, providing for seamless travel and status recognition,” said Prof John Lamola, CEO of South African Airlines.
Alliance-approved
The establishing of extensive codeshares has approvals from their respective alliances – Sky Team (Kenya) and Star Alliance (SAA), a 24-member network of commercial airlines operating in 184 countries.
SAA says it will introduce flights to Blantyre and Lilongwe in Malawi, Windhoek in Namibia, and Victoria Falls in Zimbabwe before the start of the festive season.
Together with increased frequencies to Accra in Ghana, Cape Town, Durban in South Africa, Harare in Zimbabwe, Lusaka in Zambia, Mauritius and Kinshasa in DR Congo, these changes represent the second phase of SAA’s post-Covid recovery plan.
KQ, on its part, suffered a setback last week due to a strike by its pilots.
It has faced competition in its traditional routes to West Africa and London, with Ethiopian Airlines and RwandAir increasing their frequencies.
RwandAir direct flights
RwandAir launched direct flights between Heathrow and Kigali from November 6. The airline has flown between London Gatwick and Kigali since May 26, 2017 through Brussels.
In 2020, the Rwandan flag carrier switched to London Heathrow.
SAA is still suffering Covid blues. Cash generated from operations is insufficient to meet its debt obligations while the airline business remains under pressure. Last month, it received a boost when the International Air Services Council allowed it to retain all its historical route traffic rights, after relinquishing a number of frequencies on the destinations it is not currently servicing.
“SAA continues to operate its current network and schedule with six regional and three domestic destinations,” said Lamola.
“Currently, the airline has deployed additional capacity on the Cape Town route to meet demand and we have increased the aircraft size on the Harare route.”
From paper to market
Observers say if KQ and SAA can overcome their internal challenges to move the partnership from paper to market, define structures, navigate regulators and embrace open skies, the tie-up could as well be what lifts them out of their current quagmire.
“A jointly owned operation is likely to protect the carrier from the predatory tendencies that took the partners into dangerous territory as one watches over the other. On the other hand, embracing competition under SAATM (Single African Air Transport Market) would incentivise them to offer a compelling and competitive product to support their survival,” adds a figure in Africa’s regulatory aviation space.
Source: The EastAfrican