Four Key Moves to Expect from KQ-SAA Deal

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Kenya Airways and South African Airways announced plans towards the end of last year to launch a Pan-African airline group by 2023 in a partnership that will see the airline duo share the exchange of knowledge, expertise, innovation, digital technologies, and best practices.

The partnership is expected to improve the financial viability of both airlines and most importantly, to the flyers in the continent will expect to benefit from more competitive pricing offers once full integration is complete.

Indeed, it has been quite a while since we’ve seen a deal of such magnitude take place.

A variety of movements are crucial to the success of this partnership still in its infancy, so here are four key points to watch in the KQ-SAA deal:

Africa Continental Free Trade Area (AFCFTA)

Inspite of the global pandemic, civil aviation in Africa has long been a victim of the same challenges – namely a lack of bilateral agreements on civil aviation, high operating costs, volatile taxation and persistent perceptions of poor safety.

For years, getting from point A to point B by air was only possible through hubs outside Africa and the introduction of direct intra-African flights proved non-competitive in terms of pricing.

The two giant African Airlines said their partnership was aligned with the aspirations of the Africa Continental Free Trade Area Agreement (AfCFTA) which aims to provide a single market for goods and services on the continent.

“It takes investment and collaboration to create aerospace clusters that can compete in International markets. Organising and aligning all stakeholders to develop industrialization policies that advance a collective outlook in which aerospace takes central stage is key – with it comes the promise of socioeconomic development,” said Mikail Houari, President – Africa and Middle East, Airbus in a white paper dubbed ‘The Great Enabler’ (2018).

Blending Unique Brands

While KQ and SAA Will be creating a new brand they intend to maintain their separate brands.

So far, there has been no mention of branding plans part of the new airline being created. While both carriers are painted white with both having their respective flags on the tail, it is unclear how the two airlines plan to brand blend.

Perhaps, we are expecting a completely new brand, with new colours. More of this will be announced as time goes by.

Combining Networks

Ideally, the combined route networks would make the new carrier among the largest airline in the continent — stepping on the toes of Ethiopian Airlines and Turkish Airlines which have been dominating the African skies.

Both airlines maintain almost similar regional market shares in several areas. Adding these two networks would result in more daily flights opening the door for routes to smaller countries and ones previously exited.

Leveraging each airline’s unique crew bases, hubs and focus cities will be critical from a network strategy point of view. They’ll need to refine these networks to compliment each other.

Some point-to-point operations and other constraints while targeting markets correctly could make or break the new partnership.

Maintaining low Operational Costs

This doesn’t come cheap as it often comes with a mirage of operational and administrative difficulties.

The premise behind both airline duo business models is keeping costs low, resulting in lower pricing for the consumer. But operational issues are costly and could hinder an a new carrier’s growth.

While this is a case of one airline saving the other from post-bankrupcy – as neither of the two airline is in a great position. South African Airways had filed for bankruptcy in 2020. And Kenya Airways is still recovering from its worst ever financial year – these are two struggling airlines financially.

As much as they have stood the test of time due to government support, a Pan African airline coped with union conflict, messy network strategy, etc. could certainly slow down its anticipated growth.

Now, there are a lot of factors that Kenya Airways-South African Airways has working in their favor, including healthy route networks, and a clear strategic business.

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