KQ mulls a closer relationship with SAA

Kenya Airways may cozy up to rival South African Airways (SAA) as the embattled companies seek to narrow the gap to the continent’s biggest carrier, Ethiopian Airlines Enterprise.

KQ, sub-Saharan Africa’s third largest by passenger traffic, views a closer relationship with SAA, the number two, as a possibility amid turnaround efforts at the unprofitable operators, CEO Sebastian Mikosz said in an interview.

Mikosz said he has spoken with Peter Davies, the restructuring expert recruited by the South African carrier last year, to see “what we can do together.”

Kenya Airways was taken under government control in November after posting the biggest loss in the nation’s corporate history in 2016 and is cutting routes and planes to help revive earnings. SAA, under an eighth CEO since 2010, reported a seventh straight annual loss earlier in May and is seeking emergency funding, even as it targets break-even by 2021.

Co-operation between the companies could range from a simple code-share agreement allowing reciprocal ticket sales to a more extensive joint-venture arrangement, Mikosz said.

“One of the key components of our growth is partnership,” said the former LOT Polish Airlines chief, who this week reaches his first anniversary at the helm of Kenya Airways. The airline isn’t holding “a sword and a gun” to its rivals, but is “here to push things forward in a positive manner”, he added.

Smart move

Any agreement with SAA would probably be a “long way” off and it’s not clear whether SAA would be interested, according to Mikosz. Still, there are strong links between markets served by the carriers, and there are intra-African routes “where it would be smart to do something”.

Kenya Air may also pursue deeper links with Air Mauritius, with which it already has a code-share accord, and even Ethiopian Airlines, according to Mikosz, though the level of competition between the two and the proximity of their markets is such that regulatory approval would be much tougher to secure. “Just code-sharing would be a huge challenge,” he said.

Ethiopian Airlines is planning to establish half-a-dozen international offshoots before the end of 2018, adding to stakes in Malawi Airlines and Togo-based Asky, as it steps up efforts to dominate markets across the continent, CEO Tewolde GebreMariam said earlier in May.

Kenya Air doesn’t plan to adopt that model, which would require it to be “co-responsible” for running other airlines without having full control, Mikosz said by telephone on Friday, adding that he would prefer partnerships on commercial terms.

Co-operation between African carriers is being partly driven by the pressures they face from the big three Persian Gulf operators and Turkish Airlines, which have captured a major slice of the market. The continent’s traffic flows are also relatively small, accounting for just 2.4% of the global total in 2017, with the region’s 99.1-million passengers carried amounting to 30-million fewer than at European discount specialist Ryanair alone.

“It’s a small market, so you’re better off talking to people rather than just fighting them,” Mikosz said.

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Kenya Air’s financial performance is “improving”, but it’s too early to say that the carrier, 27% owned by Air France-KLM Group, is out of trouble, according to the CEO. “We’re still in a phase of healing ourselves,” he said.

SAA didn’t immediately respond to calls and e-mails seeking comment.