Kenya Airways (KQ, Nairobi Jomo Kenyatta) is re-assessing its plans for a pan-African alliance with South African Airways (SA, Johannesburg O.R. Tambo) , the critical issue being getting strategic investors, according to The Africa Report.
Asked for clarification, Kenya Airways Group Chief Executive Officer Allan Kilavuka explained to ch-aviation: “It is simply a matter of sequencing events. Making sure we have the priorities of strengthening the anchor airlines before we pull the trigger”.
SAA was not immediately available for comment.
According to The Africa Report, the search for a new strategic partner for Kenya Airways, negotiation terms, an evaluation of the airline, and the amount of capital needed are all factors that could delay the proposed alliance with SAA. The government intends to end Kenya Airways’ reliance on state support by the end of December 2023.
The proposed alliance with SAA has been the brainchild of Kilavuka’s who sees consolidation as the answer to Africa’s fragmented airline industry by exploiting greater economies of scale.
As the anchoring members, Kenya Airways and SAA set an initial target of establishing the structure of a new group holding company by the end of 2023. In November, they signed a Strategic Partnership Framework. Still, both airlines have rejected merger suggestions, saying the partnership would be commercial, involving coordinated networks and schedules around their respective hubs at Nairobi Jomo Kenyatta and Johannesburg O.R. Tambo, code-sharing, combined pricing, and reducing operating costs through bulk aircraft procurement and groundhandling services.
However, the finalisation of the deal depends on how quickly Kenya Airways and SAA can strengthen internally through their respective privatisation efforts. Kenya Airways is restructuring with state loans that must be repaid, while SAA is yet to finalise a three-year semi-privatisation process with preferred strategic equity partner Takatso Aviation.
The deal is currently pending a decision from South Africa’s Competition Tribunal following a hearing on June 20. It was greenlighted by its advisory body, the Competition Commission, on the condition that Takatso’s minority partners, Global Aviation Operations (GE, Johannesburg O.R. Tambo) and Syranix, withdraw from the consortium over antitrust concerns. The minority group agreed to bow out last month after previously having dug in its heels. An international investment bank has been appointed to investigate potential buyers and evaluate SAA’s assets, even though the government plans to sell 51% of SAA for a nominal ZAR51 rand (USD2.84) in exchange for an investment of ZAR3 billion rand (USD167 million) in operational capital. Under the privatisation transaction, the government must cover SAA’s legacy debt, which reportedly still sits at ZAR1.5 billion (USD83.5 million).
Source: Ch-aviation
