Kenya Airways Plc and South African Airways are planning a series of investor roadshows to help find a financial backer for a combined airline group they aim to create next year.

The campaign to attract a majority investor for a holding company to be modeled on British Airways and Iberia owner IAG SA is likely to start before the end of the northern-hemisphere summer, Kenya Airways Chief Executive Officer Allan Kilavuka said in an interview on Thursday. Events will be staged in Africa, London and the U.S.

The governments of Kenya and South Africa plan to take a minority stake in the venture, which has the working name Pan-African Airline Group, Kilavuka said. The carriers are also seeking to recruit a third member from West Africa, most likely in Nigeria, Ghana, Ivory Coast or Senegal, he said.

“There has been cooperation in the past but only short-term steps like interlining,” the CEO said at the CAPA Airline Leader Summit in northwest England. “What we are talking about now is very different. African aviation is so fragmented with 200 or 300 airlines, but only a handful are viable and even they are not very strong.”

The push to create an enlarged airline out of sub-Saharan Africa’s second- and third-biggest carriers — they trail Ethiopian Airlines Group — began last year with a government-level accord followed by an agreement on a strategic framework for the company. Kilavuka said the focus is on securing backing from a financial institution rather than an industry partner like a Gulf carrier, as that might compromise plans to split long-haul flights between their respective hubs.

Different Hubs 

According to one scenario, SAA’s Johannesburg base would be a focus for southern-hemisphere operations, such as flights to Sydney, while operations to Asia would go through Nairobi. The hubs would be able to maintain some competing flights, and cities such as London would get services from both.

A spokeswoman for SAA didn’t immediately respond to a request for comment. 

“Following discussions between the two governments, there have been exploratory talks between the airlines,” South African Public Enterprises Minister Pravin Gordhan said by text. “There is certainly scope for a well considered pan-African airline group.”

Kilavuka said that Kenya Airways needs to complete a restructuring before the new venture can proceed, though a round of cost cuts should be done by June. The government, as the biggest shareholder, is supporting the process but requires the carrier to reduce its network, fleet size and workforce, Treasury Secretary Ukur Yatani said in his budget speech Thursday.

As for taking a share in the combined airline group, it’s “a work in progress,” Joseph Njoroge, principal secretary of state for the Department for Transport, said by phone.

Close Collaboration

Kenya Airways and SAA are meanwhile collaborating more closely than ever before, Kilavuka said, implementing code-share agreements and mutual lounge access and examining the case for a cost and revenue sharing joint venture on the Nairobi-Johannesburg route.

Other areas of cooperation could include joint training and maintenance, while surplus Boeing Co. 787 wide-body jets from the Kenya fleet may be operated by SAA after the South African firm’s aircraft roster was reduced after a lengthy spell in bankruptcy protection. The government, having been forced into repeated bailouts of the flagship carrier, sold a majority stake to a local jet-leasing company and private-equity firm last year. 

It’s also possible that the carriers will take steps to consolidate their alliance membership, with Kenya Airways quitting the Skyteam group or SAA exiting rival Star, Kilavuka said. The Dutch arm of Air France-KLM could also exit its roughly 7% holding in the Kenyan company, he said. 

Source: Bloomberg

Consolidation is the key to driving forward aviation in Africa, according to the chief executive of Kenya Airways.  

“The future of African aviation relies on consolidation to reduce unit costs and connect the continent more,” Kenya Airways Group MD & CEO Allan Kilavuka said at the CAPA Airline Leader Summit in the UK on April 7, 2022.  

“That’s what we’re working on,” he continued in a panel discussion that was streamed online. “We’ve started discussions with some of the major airlines in Africa, especially South African Airways. We want to see how to use assets from both airlines and increase connectivity.” 

Kenya Airways and South African Airways signed a Memorandum of Cooperation (MoC) with the intention of consolidating resources and establishing a Pan-African airline group back in September 2021.   

Joining forces would help bring unit costs down and make African airlines more viable, Kilavuka said, highlighting there were hundreds of small airlines across the continent, many of which were not profitable.  

He said aviation was crucial to the African continent given poor road and rail links. Kenya Airways also has the benefit of a sizeable population in the region, Kilavuka said  

“We need air travel. African carriers should grow, they have to grow,” he said, while also noting a lack of healthy finances is a challenge for the region’s airlines.   

Kilavuka also noted that Kenya Airways was loss-making before the pandemic, and the COVID-19 crisis only made the situation worse. He said the airline was confident it now had the right people in place for a recovery but was still looking for the right business model.   

Talking about current demand and recovery from the pandemic, Kilavuka said he expected demand across Africa to recover by the end of 2023. At Kenya Airways, although Omicron hit bookings in the first quarter of 2022, summer bookings are “very strong”, he said.  

Source: Aerotime Hub

Kenya Airways slashed full-year operating losses to KSh6.8 billion ($59 million) during 2021, a reduction of 75%.

It generated just over KSh70 billion in revenues over the 12 months to 31 December.

But passenger numbers of 2.2 million were still 57% down on the pre-crisis figure in 2019, and capacity remained nearly two-thirds lower.

Despite the “muted operations”, the carrier says it achieved an improved performance owing to the easing of travel restrictions in some of its more important markets.

Chief executive Allan Kilavuka insists the airline’s management team is “committed to strengthening our business and achieving profitability” by focusing on sustainable operations “anchored around resilience, innovation, and diversification”.

“We are making investments in innovation, technology and other efficiencies that will give our employees the support they need to take care of our customers,” Kilavuka adds.

Kenya Airways chair Michael Joseph acknowledges that last year was “a challenging one” for the industry, with restrictions being lifted and re-imposed as it progressed. The emergence of the ‘Omicron’ variant of Covid-19, he says, “disrupted” the recovery.

“Restructuring and transformation initiatives made during [2020] contributed immensely to the recovery during the second half of [2021],” he adds.

Although direct operating costs for the airline rose by a third last year, as a result of increased operations and higher fuel prices, Kenya Airways says its total operating costs fell by 3.6%.

Source: Flight Global

Yvonne Manzi Makolo, CEO of RwandAir, says that the company, now 49% owned by Qatar Airways, is looking beyond the pandemic to exploiting Africa’s huge aviation potential.

How has the Covid-19 pandemic affected your expansion plans and your medium- to long-term strategy?

We had a lot of momentum in the lead-up to the pandemic. We were expanding and had 29 routes running and more planned, both within and beyond Africa, but when Rwanda went into lockdown, we had to shelve most of these plans.

Rwanda closed off its airspace to commercial flights between March and August 2020, so we had to ground our fleet and re-evaluate our business model. The government of Rwanda has taken the pandemic very seriously, but has been very supportive of affected businesses, including those in aviation. Our staff were considered front-line workers, so we were able to get everyone vaccinated quickly.

We were able to operate cargo-only flights to support the export sector, as well as bringing in medical supplies like PPE. We converted our cabins to allow us to transport high-value exports like avocados, chillis, French beans, and flowers to lucrative markets in Europe and the Gulf.

We also carried out several repatriation flights, mainly to and from Europe, North America, and China, not just for Rwandans but also for citizens of other Central African counties.

By the time we resumed commercial flights in August 2020 we had shrunk our network to remove less profitable routes, including to Senegal, Juba, and Tel Aviv, which have still not been restarted.

Unfortunately, we were also forced to lay off some staff, though we have started rehiring them now. We had to cut back on in-flight services to focus more on safety and security procedures, which was obviously our priority.

We were on the road to recovery when the Omicron variant was recognised in December 2021, which was peak travel season. That knocked us back again as we had to stop all our Southern African routes, as well as major long-haul flights, to London and Dubai for example.

Now that the Omicron outbreak is being managed things are once again picking up and we are seeing increased passenger numbers. We hope to see consistent improvements between now and the 2022 summer season.

Covid has created challenges, but also opportunities, with SAA’s privatisation and Kenya Airways restructuring its network. How is RwandAir planning to fill new gaps in the market?

We had to pull out of some of our own routes, which other airlines are now eyeing, while we are looking at moving into new routes that have become available and which fit with our location and model.

Africa was already underserved and less connected than it should be, so there are lots of opportunities for airlines to gain market share at the moment. Even during the pandemic, we opened a few new routes.

These included Bangui (CAR), and Goma and Lubumbashi (DRC), which have been doing extremely well since we opened them in 2021. So, we are still working towards our objective of connecting Africans with each other and with the world.

In 2020 it was announced that Qatar Airways was purchasing a 49% stake in RwandAir. What is the state of negotiations, and how will they help RwandAir establish itself as a global airline?

Commercial initiatives, such as codeshares, between RwandAir and Qatar Airways were agreed upon in September 2021 and have been operation since December 2021. These have linked Kigali’s air transport hub with that of Doha, which allows us to expand our network significantly.

We can now reach most of Eurasia, while Qatar can reach most of Africa. Travellers can earn and exchange air miles between loyalty schemes, while we have access to Qatar Airways’ training facilities for pilots and cabin crew.

Qatar Airways has also purchased a 60% stake in Rwanda’s Bugesera International Airport. How does this arrangement benefit both Qatar and Rwanda?

The joint venture is still being worked out but is probably a few months away from being finalised. This will give Rwanda a large, modern airport, which is central to our plans to make Rwanda a transport hub, as well as Qatar’s plans to service the African continent. This will allow Rwand­Air to expand and allow the economy to benefit from ripple effects such as tourism and job creation.

It’s a massive project, around 25km outside Kigali, that is set to grow into an “airport city”, with housing, hotels, and entertainment centres, which presents a world of opportunity to local businesses. The first phase is set to be completed in 2024-25, which will give the airport a capacity of 7m passengers.

The second phase will expand on that, but details are yet to be finalised. The whole project is a good example of the government’s preferred private-public partnership (PPP) model, and there will be opportunities for further PPPs in everything from construction to service provision as the project advances.

How is RwandAir embracing innovation to attract customers and establish itself in the international market?

We are always looking for ways to make travel easier, add value and differentiate ourselves from the competition. We have invested in digitising and automating a lot of things, such as online sales and online check-ins, which has actually been helped by the pandemic and the emphasis that was put on getting things done remotely.

Qatar Airways has always been on the front line of innovation, and Rwanda is a very IT-focused country, so the deal between the two will let us complement each other’s innovative spirit perfectly.

How important is the African Continental Free Trade Agreement (AfCFTA) to Rwand­Air, and what is your role in the promotion of African trade?

The finalisation of AfCFTA will be a game-changer as it will force change across the continental economy, including in aviation. It will become impractical to operate a free trade area without broad “open skies” agreements, inclusive visa policies, and other provisions that will make it easier for people to use our services.

At the moment many barriers still exist across Africa, including complicated visa procedures, inconsistent infrastructure, a lack of ground handling facilities, prohibitively high airport taxes, and unmaintained or unlit runways, all of which have to be addressed before Africa can develop a sustainable and affordable aviation industry.

For AfCFTA’s benefits to be felt in full, governments need to look at the continent holistically and address some of these bottlenecks so that aviation isn’t a limiting factor.

As Rwanda becomes a regional centre for sport, tourism, and the MICE (meetings, incentives, conferences and exhibitions) segment, while promoting travel-friendly policies at home and abroad, AfCFTA presents Rwandans, RwandAir, and our partnership with Qatar with the opportunity to play a crucial role in Africa’s future.

Source: African Business

The long serving CEO of Africa’s largest airline Ethiopia Airlines has stepped down, citing ill health. Starting at the firm in 1985, he become CEO in 2011. He leaves behind a strong legacy, the envy of other African airlines who struggle to match Ethiopian’s operational efficiency.

Less than 24 hours after the announcement of the resignation of Tewolde GebreMariam, the CEO of Asky Airlines in Togo, Mesfin Tasew, has been appointed to take over as head of Ethiopian Airlines.

His appointment on 24 March, follows the resignation of Tewolde GebreMariam, who took early retirement on March 23 for health reasons.

Tasew will be responsible for the continent’s leading airline, with 130 aircraft covering 120 destinations worldwide.

Tewolde GebreMariam is a towering figure of African aviation, dragging Ethiopian Airlines through a profound modernisation process, and running the state-backed company profitably, in comparison to many continental peers.

“I pay tribute to the work of a man who has led Africa’s largest airline for over 11 years”, says Abdérahmane Berte, head of the African Airlines Association (AFRAA).

“Under his leadership Ethiopian Airlines became the largest African airline. A position maintained for many years”, he says. “For the sake of history I also note the important role of Ethiopian Airlines as one of the founding companies of AFRAA.”

Ethiopian Airlines tripled its fleet under Tewolde GebreMariam’s watch, from around 40 when he took over as CEO in 2011, to 120 today.

Turnover also grew from $1.3bn in 2011 to $3.9bn in 2019-2020. And Ethiopian’s Addis Ababa hub now flies to 120 destinations, compared to 80 in 2010.

While the Covid-19 pandemic has had a huge impact, kicking a billion-dollar hole in the budget, Ethiopian Airlines has managed to be operationally flexible, refitting several passenger planes into cargo carriers, the fruit of a long-started diversification exercise.

Ethiopian Airlines was the continent’s fifth largest carrier, after South African Airways, Egyptair, Royal Air Maroc and Kenya Airways. But post pandemic, thanks to this agility — and the decline of other carriers — it finds itself Africa’s biggest as measured by turnover in our exclusive ranking of Africa’s Top 500 Companies.

“Ato Tewolde was a game changer in African aviation. He bumped Ethiopian Airlines into the new century with a solid and steady hand, expanding the airline in terms of scope and profits beyond what was thought possible in Africa”, says one African aviation expert who asks not to be named. “His agility was apparent in Ethiopian’s stunning quick turn once the pandemic decimated passenger traffic by quickly converting passenger aircraft to freighters, earning the awe and admiration of business leaders worldwide. Honestly his handling of ET during Covid was spectacular.”

“I have already retired due to ill-health & the resignation I submitted to the gov’t was accepted”, Tewolde told Ethiopia Check.

The news was broken by local news outlet the Addis Standard.

Source: The African Report

Kenya Airways will now fly daily to India after the Asian country lifted the restrictions that had limited the national carrier to three flights a week, coming as a major boost to the airline that is struggling financially.

KQ, as the carrier is known by its international code, has been operating flights to India under a special arrangement normally referred to as ‘air bubble’ in aviation and which also limited the number of passengers to 400 a week.

The carrier, which resumed flights to India in September last year after it had stopped flying to the Asian country on April 2021, will also be making ten weekly flights to India starting April, coming as a major relief to passengers seeking to travel to the country.

“We are excited and ready for take-off to Mumbai with daily flights from March 28, 2022, and ten weekly flights from April, 17,” said KQ in a notice to its customers.

India has now opened its airspace to the national carrier as cases of Covid-19 in the country continue to decline.

The additional frequencies to Mumbai come just days after KQ cut frequencies to some of its destinations and stopped the launch of new routes citing declining demand for passengers.

A large number of patients from Kenya travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts relatively more affordable healthcare.

Kenya Airways has postponed the launch of flights to Italy even as it suspended its operations to Cameroon due to low demand for passengers.

The national carrier was to start flying to Rome and Milan in June but it says the plans have been put on hold due to lower demand than it had earlier projected.

According to the initial schedule, KQ was to operate two weekly flights on Wednesday and Sunday using a large capacity aircraft Boeing 787 Dreamliner.

KQ re-introduced flights to Rome in 2019 after a seven-year hiatus, banking on increased traffic between the two continents and a new link in Geneva to boost its earnings.

Source: The East African

The South African government has concluded and signed a sales and purchase agreement for the sale of 51% of South African Airways with its preferred strategic equity partner, the Takatso Consortium, according to an announcement by the Ministry in the Presidency following a Cabinet meeting on February 23.

“The next step involves the approval of this transaction by various regulatory bodies,” it said in a statement.

The Department of Public Enterprises (DPE), SAA’s shareholder representative, had been locked in negotiations with Takatso for months, but aims to finalise the partial sale of the loss-making national carrier in early 2022, according to National Treasury’s 2022 Budget Review, also tabled on February 23. The terms of the sales agreement were not disclosed, but Takatso is to inject ZAR3 billion (USD196 million) in operational cash, while the government funds are to be used to settle SAA’s historical debts.

Takatso is a joint venture between asset fund manager Harith General Partners, the majority shareholder in the SAA transaction, and ACMI specialist Global Aviation Operations (GE, Johannesburg O.R. Tambo). “The Takatso deal is progressing well,” the DPE spokesman confirmed to ch-aviation.

Meanwhile, the government will pump another ZAR1.8 billion rands (USD119.3 million) into SAA during 2022/2023 despite the carrier continuing to rack up losses since resuming operations on September 1 last year.

By December 31, 2021, it had operated a total of 1,023 domestic and regional flights. Within those four months, it had also incurred a ZAR2.7 billion (USD179 million) loss against a budgeted deficit of ZAR2.3 billion (USD152 million), according to a National Treasury briefing to Parliamentary on February 15.

The latest financial support represents the balance of ZAR16.4 billion (USD1 billion) set aside for SAA in the 2020 Budget Review to settle state‐guaranteed debt and interest costs.

“To date, Government has paid ZAR14.6 billion (USD967.5 million) of this amount, with the remaining ZAR1.8 billion to be paid in 2022/23,” according to the government’s 2022 Budget Review tabled on February 23.

An additional ZAR10.5 billion (USD695.8 million) was allocated to SAA in 2020/2021 for the implementation of its business rescue plan. Of this, ZAR2.7 billion (USD179 million) was diverted to its subsidiaries in terms of a special appropriation bill in 2021.

Further state support of ZAR3.5 billion (USD232 million) is required over the next three years to implement the business rescue plan – as outlined in an interim business plan in June 2021 – but still needs to be approved. “Government will honour its commitment to implement the SAA business rescue plan,” a DPE spokesman told ch-aviation.

SAA intends to introduce long‐haul routes in the second half of 2022. The flag carrier resumed limited commercial operations in September 2021 in line with plans for a conservative re-entry into domestic and regional markets following a protracted business rescue process started on December 5, 2019, following years of continuous losses.

While in business rescue, SAA defaulted on ZAR890 million (USD.58.5 million) of revenue owed to former franchise partner Airlink (South Africa). It still owes Comair (South Africa) ZAR750 million (USD49.5 million) as part of a SA Competitions Tribunal settlement.

Harith General Partners – the majority shareholder in the Takatso Consortium which has been leading the negotiations with the government – is 30% owned by South Africa’s state-owned Public Investment Corporation (PIC). It manages the Government Employees Pension Fund (GEPF), which continues to be “well funded and financially sound”, according to the 2022 Budget Review. “At the end of March 2021, the GEPF had a net cash flow position of ZAR34 billion (USD2.2 billion),” the document states.

Delivering his 2022 Budget Speech in Parliament on February 23, Finance Minister Enoch Godongwana did not mention any allocation to SAA but warned of “tough love” for state-owned companies going forward. He said the future of state-owned companies was under review by a Presidential State-Owned Enterprises Council. “Their future will be informed by the value they create and whether they can be run as sustainable entities without bailouts from the Fiscus.”

“Some state-owned companies will be retained, while others will be rationalised or consolidated. To reduce their continuing demands on South Africa’s public resources, the National Treasury will outline the criteria for government funding of state‐owned companies during the upcoming financial year,” he said.

Source: Ch-Aviation

With many countries beginning to ease their travel restrictions, airlines are eyeing 2022 as a year for recovery. Kenya Airways is once such carrier, with the Nairobi-based operator projecting a notable rise in passenger revenues this year. The airline is hoping for a busy summer despite the uncertainty of an upcoming election.

Revenues up by a fifth

Speaking to Reuters, Kenya Airways’ Chief Executive Officer, Allan Kilavuka, explained that the airline’s worst days in the coronavirus pandemic are likely behind it. He stated that “we have been through the worst patch,” with this likely referring to the early months of the crisis. Indeed, Reuters notes that, during 2020, revenues at the Kenyan flag carrier halved. Since then, it has been on the comeback trail.

While 2020 was the most challenging year for Kenya Airways during the present pandemic, it still faced challenges in 2021. Despite a 21% growth in passenger revenue last year, which narrowed its losses by a fifth, the national airline also lost 11.5 billion Kenyan Shillings ($101 million) in the first six months of 2021.

Moving into 2022, Kilavuka foresees calmer skies for Africa’s only SkyTeam alliance member. He explained to Reuters that he expects passenger revenues to rise by a further 20% this year. This will help establish a consistent recovery path away from the chaos of 2020. However, the projection is dependent on certain factors.

Relying on a consistent market

One of the primary areas of financial concern for airlines amid the present crisis has been the difficulty in adapting to ever-changing travel restrictions. With these regulations liable to sudden changes, it can be hard for airlines to make economic plans with much certainty. Equally, it can take time to respond to positive changes.

With this in mind, Reuters notes that a consistent market will play a key role in enabling Kenya Airways‘ positive revenue projections. Indeed, its CEO told the agency that the forecast “is dependent on no further travel disruption or restrictions caused by any new coronavirus variants.” This, of course, remains to be seen.

For the country of Kenya itself, there is also the small matter of a general election to contend with this year, on August 9th. Kilavuka hopes that the election will be a peaceful occasion, given that the peak summer season has seen ‘promising’ booking levels. However, violence has marred two of the country’s last three elections.

Aiming to return to profitability

As it looks to recover from the impacts of the early months and year of the ongoing coronavirus pandemic, Kenya Airways’ longer-term aspirations include a return to profitability. With this in mind, it has commissioned a report from Seabury, a consulting group. Kilavuka explains that, ultimately:

“We are looking for a more efficient airline. The network should not lose money.”

This may lead to cuts in certain areas, with the CEO telling Reuters that the carrier will take “a critical look at staffing and the renegotiation of contracts with suppliers and plane leasing firms.” It will be interesting to see what comes of these efforts, and how successful Kenya Airways profitability plans will prove to be.

Source: Simple Flying

Ethiopian Airlines has announced that it plans to put its Boeing’s 737 Max back to service for the first time since the aircraft model was involved in a crash that claimed 157 lives three years ago. Chrystal Zhang has studied the business models of airlines. We asked her to make sense of the source of Ethiopian Airlines’ confidence.

When, and why was Boeing’s 737 Max grounded?

By 12 March 2019, two days after Ethiopian Airlines flight 302 crashed, civil aviation authorities in China, Australia, Britain, France, Germany, Ireland, Malaysia, Mongolia, Oman and Singapore had already grounded the 737 Max.

This was in addition to airlines in Brazil, South Africa, South Korea, Norway, India, Turkey and other countries. On March 13, 2019, the US Federal Aviation Administration grounded the entire 737 Max fleet.

The decision was made following the fatal crash of Ethiopian Airlines’ 302 flight enroute from Addis Ababa to Nairobi. The accident killed all 157 passengers and crew members on board.

This wasn’t the Boeing 737 Max aircraft’s first incident.

On 29 October 2018 there was a fatal crash of a flight operated by Lion Air, an Indonesian low-cost carrier. The airline was enroute from Jarkata to Pangka Pinang and the crash resulted in 189 casualties.

Two years earlier, in March 2017, the US Federal Aviation Administration had granted an amended-type certificate to Boeing for the 737-8 aircraft, the first of the 737 Max family. An amended type certificate approves modification, and how such modification affects the original design. The Max is the fourth generation of the 737 model airplane, and is the successor to the company’s 737 Next Generation family of aircraft.

The 737 Max was the 12th derivative model of the 737 aircraft, which was first certified half a century earlier in 1967. Two months after the US Federal Aviation certification, the first 737 Max entered revenue passenger service with Malindo Air, a Malaysian air carrier. Seventeen months later the 737 Max suffered its first fatal crash.

Is there a consensus on the cause of the accidents?

A study has analysed the cause of the 737 Max crashes. The model had a new feature in its flight control computer – the manoeuvring characteristics augmentation system – that has become the centre of scrutiny for Max crashes.

The new system had an ability to trigger flight control movements that challenged the pilots’ command of the aircraft. In addition, the software operated on input from one of the two sensors externally mounted on either side of the aircraft’s fuselage (main body).

For Ethiopian flight, the system triggered four times as a result of false sensor readings, forcing the airplane into a nose down from which the pilots were unable to recover. Faulty sensor data that erroneously triggered the system to repeatedly activate landing played critical roles in the Max crashes.

Given significant advances in aviation safety over the last two decades it was extraordinary for two new airplanes, of a new derivative model, to crash within five months of each other.

While certain facts and circumstances surrounding the accidents differed, a common component in both was the new flight control feature.

Boeing developed the system to address stability issues in certain flight conditions induced by the plane’s new larger engines and their relative placement on the 737 Max aircraft compared to the engines’ placement on the 737 NG.

Is Ethiopian Airlines jumping the gun?

So far, 13 airlines have resumed flying Boeing’s 737 Max. These include The Ryanair Group of Ireland, Air Canada, American Airlines, Alaska Airlines and India-based SpiceJet.

In the case of Ethiopian airlines, the reasons for resuming its flights include:

• The action taken by both Boeing and the US Federal Aviation Administration in terms of product redesign, pilot training requirements, commitment to corporate culture change and certification. These seek to ensure that the aircraft model satisfies all regulatory requirements.
• Boeing’s 737 Max has its unique market positioning to serve the short-medium haul market
• The aircraft is more economically viable for airlines to use to serve their target market
• The airline had made financial commitment to aircraft procurement

Have the crashes been fully analysed and resolved?

The US House Committee on Transportation and Infrastructure conducted an 18-month investigation into design, development, and certification of the 737 Max aircraft, and related matters.

The Committee’s investigation has revealed multiple missed opportunities that could have turned the trajectory of the Max’s design and development toward a safer course. The model resulted from flawed technical design criteria, faulty assumptions about pilot response times, and production pressures.

Boeing failed in its design and development of the Max. The US Federal Aviation Administration, on the other hand overlooked its aviation safety mission. It failed in its oversight of Boeing and its certification of the aircraft.

At the direction of Committee Chair Peter DeFazio and Subcommittee on Aviation Chair Rick Larsen, the 245-page report is being released to help inform the public’s understanding of what went so horrifically wrong and why.

What are the lessons learnt?

Never be complacent: Boeing is renowned for its disruptive innovation and novel products. It has served the global aerospace and aviation markets throughout its one-century history. But the company has become more of a financially successful business than a great engineering firm. It was the intent of Harry Stonecipher, its President and Chief Operation Officer in 2004, who championed the corporate culture change. But past glory does not warrant future success. Staying competitive in the market requires innovation, but more importantly, respect and protection of customers and stakeholders.

Do things right and do the right things: These are the fundamental ethical values that a good engineer upholds to be accountable for the safety, health, and welfare of the public. Driven by the desire to outpace its rivals – while designing, developing and introducing B737 Max to the market – Boeing failed to meet both criteria. Boeing, and any other business, need to adhere to these fundamental values and be accountable for its conduct.

Improve safety cultures: There is an ongoing debate that upholding highest safety standards and nurturing safety culture jeopardises a business’s financial success and operational efficiency. However, safety is the foundation of aerospace and aviation business. A safety culture ensures trust, accountability and responsibility. It eventually leads to a firm’s sustainability.

Face the truth and act honestly, and with integrity: When in a crisis, the most effective way to win trust from the public and society is to face the truth and act honestly and with integrity. Any attempts to cover up the truth or mislead the public are doomed to fail.

Source: The Conversation

Africa has 357 airlines, the top 10 of which carried more than 60% of traffic. This reflects the fact that many airlines on the continent are very small: some have as few as two aircraft. Between them the airlines carried 95 million passengers in 2019, according to Routes, an online source of information on route announcements.

Airlines operating on the continent face particular challenges.

Firstly, the industry has to contend with huge disparities in economic and air transport development. There is also an uneven distribution of international air passenger traffic across regions and within countries. The traffic is predominantly centered in a few hubs in North, East and South Africa; and in the large and medium-size cities.

Other challenges include high costs of operation, market protectionism as well as safety and security concerns.

There are very few profitable African airlines. In 2020, only the Ethiopian Airlines made a profit in the continent. And with financial woes compounded by COVID-19, it is likely many more airlines will go under.

Two of the continent’s biggest carriers – South African Airways and Kenya Airways – are under financial stress. Both have made significant losses over the past few years and lost market share and destinations to competition. South African Airways came close to being wound up, but for its part Kenyan Airways reported losses of $333 million for the 2020 financial year.

In November, the two national airlines signed a Strategic Partnership Framework, formalising their plan to set up a pan-African airline in 2023.

In my view the partnership will only succeed if certain conditions are met. The two most important ones are that, firstly, there must be strong national and political agreement and will. But, secondly that the tie-up must be driven by the private sector.

My recent research on Air Afrique’s failure found that the airline was doomed by conflicting national objectives and some of the 11 participating countries were unhappy with what they called a subordinate role.

The case for a partnership

A range of academic studies show that alliances affect the production costs of participating airlines through economies of scale (by means of joint operations of air and ground services), increased traffic density (through network expansion and additional traffic feed) and scope (through increased reach and efficient connections).

Joint ventures, have been, and will continue to be, the key in the future development of airline business. Air France and KLM are good examples why airlines are better off working together. Both have experienced significant growth since getting together in 2004.

Some of alliance arrangements may lead to a reduction in costs and increased efficiency. But they do not necessarily lead to a reduction in competition in the market.

Apart from these benefits, an alliance between South African Airways and Kenya Airways would be good for a number of reasons specific to Africa.

Firstly, it would help them overcome some of the existing market challenges, such as market access restrictions, increased competitions from major non-African airlines such as Turkish Airlines, Emirates and Europeans carriers.

Secondly, the alliance could take advantage of a return to pre-COVID travel levels. The International Air Transport Association anticipates a full return to 2019 air traffic levels in late 2023.

And it’s estimated that air transport will grow on average by 3.2% over the next decades in Africa and by 4.8% if African States implement the Single African Air Transport Market.

Thirdly, it would enable them to create and encourage a market services specialisation among airline operators. Airlines may specialise on feeder services and fly destinations with smaller demand and catchment areas. An example of this type of specialisation include the interlining agreement between Ethiopian and Airlink.

In my view, the cooperation deal would also improve the financial viability of the two national airlines. They could pool maintenance services and reduce costs by pooling purchases, sales and financial transactions. It would boost customer volumes if cost savings were passed on to customers by means of lower fares.

Introducing services in the South African market would be a great addition for Kenya Airways and vice versa. With their hub-based model, (a hub is a central airport that flights are routed through), cooperation will help to boost the route networks of both airlines across Africa.

Why alliances fail

Many alliances don’t achieve the desired outcome. Examples include KLM – Alitalia, and the European Quality Alliance which brought together Air France, SAS and Swissair.

Alliances fail for various reasons. Studies show that ineffective governance, insufficient quality of alliance members and internal competition in the alliances are the most common reasons.

Other studies show that more than 50% of strategic alliance fail due cultural differences, mistrust or poor operational integration.

In the case of Africa, the two airlines have to contend with the fact that there isn’t a single African air transport market. Most of the continent’s 54 countries have their own national arrangements or have under-performing state-owned airlines, resulting in protectionist policies.

There is hope that this will change. The Single African Air Transport Market, which by November last year had been signed by 35 countries, envisages a share aviation space. This would enable eligible airlines from one African state to fly into another using only a prior notification procedure.

But there’s a great deal of work that still needs to be done for this to become a reality.

A number of other factors could stymie the proposed alliance.

A big one is the governance structure, which is the oversight required to make and implement decisions essential to the success of an alliance. Elements of governance include legal form, communication structures, cultural differences, trust and commitment.

Yet another factor will be the extent to which the two governments allow efficient decision making to happen. Airline managers should be left to select a course of action – and then to get on with it. This could be difficult given that the state owns substantial stakes in South African Airways; same case with Kenya Airways where the Kenyan government’s share holding is 48.9%.

Other factors include trust, transparency and communication about what both airlines do together and what they don’t do together. Establishing trust and ensuring that both airlines understand each other’s goals and objectives and that they are the same is key.

Recipe for success

A strategic alliance is similar to a marriage. In most cases there is no perfect match. To be successful partnerships must be nurtured and well managed. Mapping out all the stakeholders that are relevant to the story and are going to help the partners achieve the key performance indicators set out in the alliance is paramount.

In my opinion, setting clear performance measures is important, as they will set the partners on a path that is measurable.

Source: The Conversation