A Qatar Airways A350 taking off from the Airbus headquarters in
Toulouse, France. Middle East carriers are expected to make a profit of
$1.3b this year, making them attractive partners for Africa. AFP PHOTO |
REMY GABALDA
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 breakeven 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 arline — 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
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