Kenya
Airways (KQ, Nairobi Jomo Kenyatta)
and South African
Airways (SA, Johannesburg O.R. Tambo)
are planning a series of investor roadshows to help find a financial backer for
a combined airline group they aim to create next year, Bloomberg reports.
The campaign will see events staged
in Africa, London, and the United States to attract a majority investor for a
holding company to be modelled on the IAG International Airlines Group.
It is likely to start before the end of the northern-hemisphere summer, Kenya
Airways Chief Executive Officer Allan Kilavuka said in an interview on Thursday
at the CAPA Airline Leader Summit.
The governments of Kenya and South
Africa plan to take a minority stake in the venture, which has the working name
Pan-African Airline Group, Kilavuka said.
The carriers are also seeking to
recruit a third member from West Africa, most likely in Nigeria, Ghana, Côte
d'Ivoire, or Senegal, he disclosed.
Kilavuka suggested the carriers
could consolidate their global alliance membership, with Kenya Airways
quitting Skyteam or
SAA exiting Star Alliance. KLM Royal Dutch Airlines,
the Dutch arm of Air
France-KLM, could also exit its roughly 7% holding in the Kenyan
airline, he added.
He said the focus was on securing
backing from a financial institution rather than an industry partner like a
Gulf carrier, as that might compromise plans to split long-haul flights
between Nairobi Jomo
Kenyatta and Johannesburg O.R. Tambo,
the carriers' respective hubs. A possible scenario would be for SAA’s
Johannesburg hub to be the focus for southern-hemisphere operations, such as
flights to Australia, while operations to Asia would go through Nairobi. The
hubs would be able to maintain some competing flights, and cities such as
London would get services from both.
Kilavuka has been increasingly vocal
about the planned alliance, whereas SAA has remained more discreet in its
disclosures. Asked for comment, SAA Chief Commercial Officer Simon
Newton-Smith this week
told ch-aviation: "SAA and Kenya Airways are laying the
foundation to build a pan-African airline group and welcome potential partners
from across the continent, including West Africa to enhance our service
offering to our customers". He earlier said the goal was to achieve an
extensive reciprocal codeshare partnership by June 2022. By
June 2023, the aim is to harmonise schedules and terms and conditions on
pricing, pending anti-trust immunity in core markets. Newton-Smith stopped
short of confirming an equity exchange: "I can't tell you what that's
going to look like right now because that is a little bit further down the
line," he said.
He said SAA is focused on
rebuilding regional routes, seeing Africa as the area of most
potential, and remained cautious about an intercontinental restart.
SAA is still in a transition phase
after exiting a lengthy business rescue process in September last year. It is
currently managed via a "care-taker" plan with the South African
parliament still scrutinising a deal to sell off 51% of the
national carrier to the Takatso Consortium comprising South African black
empowerment asset firm Harith General Partners and Johannesburg-based ACMI
specialist Global
Aviation Operations. Asked how plans could be made without the
future majority shareholder's input, Newton-Smith said current decisions were
backed by the South African government, which would continue to hold a 49%
stake in SAA.
Meanwhile, Kenya Airways itself
needs to complete a restructuring before the new venture can proceed, Kilavuka
acknowledged, though a round of cost cuts should be done by June 2022. A
six-month Seabury Securities consultancy contract to help the airline cut
costs, improve efficiency, and return to growth ends in September.
The Kenyan government is supporting the process but requires the carrier to reduce its network, fleet size and workforce, Treasury Secretary Ukur Yatani said in his budget speech on April 7. The government recently paved the way for another KES20 billion shilling (USD173.9 million) bailout from the national supplementary budget for 2021/22. The money, likely to be provided as a loan, is to support the restructuring of the airline, provide general working capital, and help stabilise the balance sheet. Kilavuka previously termed it "the last shot at making sure that we have a concrete, measurable, realistic structure that will be successful for the airline".
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