KQ searches for new partner to set up regional airline after S Africa bolts out

State-owned South African Airways (SAA) has pulled out of the partnership with Kenya Airways to launch a pan-African carrier that had been tipped as a game changer for continental air travel.

KQ on Friday said SAA was no longer interested in the venture but noted it would push on with the idea.

It is now in search of other carriers across Southern Africa as well as East and West Africa willing to join it in its endeavour to enhance air travel within the continent.

KQ and SAA in 2021 signed a partnership framework that was expected to form the Pan African Airline Group.

This was expected to enable them to procure supplies such as aircraft parts and fuel in bulk, as well as lower travel costs and improve connectivity within Africa.

The carriers had also planned to onboard another airline, preferably a West African carrier, in forming the continental airline.

While the plan was deemed a potentially game-changing initiative for intra-African travel, it was also viewed with scepticism, partly on account of the financial health of two airlines at the time and the two countries, Kenya and South Africa, which look at their national flag carriers as strategic assets.

The airlines had their fair share of challenges at the time of signing the agreement but were confident that they could separately put their houses in order before coming together to form the regional carrier. 

The two carriers have recently emerged from a decade-long loss-making. KQ reported a Sh5.4 billion net profit for the year to December 2024, the first full-year profit in 11 years. The carrier is still implementing its Project Kifaru through which it has been rationalising resources, including routes, fleet and people.

SAA reported a profit for the 2022/23 financial year, which was also its first time it was making profit in 12 years. After a significant scaling down of operations as it reorganised its business, the airline is now growing its aircraft fleet and increasing the number of destinations that it flies to. 

Continental carrier

It was expected that with the two carriers appearing to be on a growth path, the next logical step would be to pursue their plans to form a continental carrier. This was however not to be.

Kenya Airways chief executive Allan Kilavuka said the plans for the partnership had slowed down over the years, and in the more recent past, SAA had backed out. “SAA has said it is not ready at this moment to proceed with the airline... but the dream of the pan-African airline group is still alive,” he said.

“We will have to look for other airlines which are more ready. We have opened up that discussion within other players in the Southern African, West African and East African countries.”

Kilavuka explained that the idea is still viable in Africa, where large carriers that can be able to take advantage of economies of scale and serve the continent effectively are scarce, but noted that numerous small airlines are serving different regions but fail to make an impact in serving Africa as a whole.

In Sub-Saharan Africa, Ethiopian Airways, KQ and SAA are among the few airlines that have the capacity to crisscross Africa.

“In Africa, we have a fragmented aviation sector. We have a proliferation of small airlines across the continent, which are sub-scale. In aviation, size is important because of economies of scale,” said Kilavuka. 

“The thinking behind Pan African Airline Group is to create a forum where airlines would consolidate into this bigger group and have enough scale.”

He added that the initial agreement was for the two carriers to clean the house before joining forces. “We are still the main sponsors or initiators of this initiative. SAA has dropped out, so we are going to look for other airlines to champion this Pan African Airline Group,” said Kilavuka.

KQ’s outgoing chairman Michael Joseph also noted other than the economies of scale, other advantages in setting up pan African airlines include improving travel on the continent. 

“We do not have other means to travel within Africa. Many people travel by air. The road network is not great between countries, and there is not a good rail network. Air transport is important for trade, moving people and tourism,” he said.

“If we get scale, we can provide this network of transportation links across Africa, which is important.”

Both KQ and SAA have been eyeing strategic investors in their next phases of completing recovery and growth. Joseph noted that even with strategic investors, there is a huge opportunity to pursue a regional carrier that brings together the strengths of different players.

“I think if we are looking long term into the future… this is very important,” he said, further noting that KQ and SAA may have rushed into the partnership, considering the two were at the time limping.

“It is an idea worth pursuing, but perhaps it was premature to try to get into this before restructuring ourselves completely, but I think the opportunity is still there.”

In addition to procuring supplies in bulk and giving travelers expanded options, by consolidating aspects of their operations, KQ and SAA were also expected to explore shared services like maintenance, repair and overhaul (MRO), optimising fleet deployment, competitive pricing and enhancing connectivity especially in East, Southern and West Africa where the two carriers already have a significant presence.

Air connectivity

When they signed the partnership framework, the two airlines noted that their partnership was a critical step to the realisation of both the Single African Air Transport Market (SAATM) and the Africa Continental Free Trade Area (AFCTA) initiatives.

There are expectations that the two initiatives will be key to increasing air connectivity on the continent, boosting trade, tourism while promoting growth and value of air transport in Africa.

The partnership was also critical for both airlines to survive the onslaught by international carriers that have increasingly become the go-to airlines for travellers to and out of Africa.

These include Middle Eastern carriers that have made major inroads in African travel but have also partnered with local carriers to smooth connections for their customers going into cities and countries where they do not operate scheduled flights. 

Moving from one country to another in Africa by air has always faced numerous hurdles that end up pushing air travel costs beyond the reach of many. This is especially the case when travelling from one region to another, say East to West Africa.

The African Airlines Association (Afraa), a pan African lobby for airlines, noted that a recent survey it conducted showed that many counties have yet to fully liberalise their airspaces and implement SAATM.

“The survey has also highlighted that the lack of political goodwill and reciprocity are the biggest hindrances to full SAATM implementation,” said the Association.

“The survey has also identified some taxes and charges that increase operational costs, and AFRAA will be making the necessary petitions on this as well as continue encouraging the adoption of measures such as fleet modernisation, implementation of free routing airspace and continued participation in carbon offset programs in ensuring environmental sustainability.