AFRICANGLOBE – Kenya Airways suggested a merger with Ethiopian Airlines and South African Airways with the view to withstanding stiff competition coming from mega non-African carriers.
Kenya Airways CEO Titus Naikuni told delegates at the 44th African Airlines Association (AFRAA) Annual General Assembly (AGA) in Johannesburg last week that his airline should come together with fellow African carriers, Ethiopian Airlines and SAA, to create a large African airline able to take the fight back to foreign carriers, which dominate 80 percent of intercontinental traffic to and from Africa.
While the big three airlines are big in the context of the African market, globally they are small relative to giant competitors such as Emirates, Air France-KLM and British Airways.
African airlines are calling for greater unity among themselves to better compete against much bigger foreign airlines in their own skies and for African governments to liberalise the continent’s air space.
Kenya Airways believes a merger between itself, Ethiopian Airlines and South African Airways is necessary to create a single large carrier representing Africa and able to compete globally. And Africa’s numerous regional airlines are looking to these three big carriers to support their growth and improve the industry’s safety performance on the continent.
But first, protective governments need to be persuaded of the benefits of open skies, while smaller carriers fear for the futures if big carriers are given greater freedoms.
“What we need to do is, to merge our airlines. There is no way that we are going to survive as small airlines,” Mr Naikuni said. “We are the lambs at the gate.” Bringing the three biggest carriers together would create one large, strong airline, Mr Naikuni argued.
Ethiopian CEO Tewolde GebreMariam agrees with the merger proposal “in principle”, saying size matters in the aviation industry which relies on economies of scale. The idea of a major pan-African airline group has to be discussed, “because now we are being challenged by not only big carriers but also governments who treat these carriers as a strategic national asset”, said Mr GebreMariam.
An independent aviation expert said that though merger among the three African airlines seems a good idea, it seems that it is a far fetched plan. “This is not something that could happen in the near future. Air Afrique, a pan-African airline established by 11 west and central African countries, has been liquidated,” the aviation expert recalled. “Naikuni idea is not bad but for me it seems to be unrealistic,” he added.
Even some of the world’s biggest airlines have conceded that they need to consolidate to survive. Europe has consolidated to three major airline groups – Lufthansa, Air France-KLM and British Airways/Iberia– in a region of 27 countries. In the United States, United and Continental have come together along with Delta and Northwest.
Even if Kenya Airways, Ethiopian and SAA were to combine, they would account for just 37 percent of Emirates’ revenue and about half the number of passengers.