Shifts towards new market policies, airline behavior, operations models and governance are clearly pointing towards a consolidated African aviation sector. Accelerated by the onset of the pandemic, what were once loose discussions around the formation of mutual pan-African airline ties are now taking shape.

While conversation centered on establishing a single African airline or airline group have been taking place for some time, it's only now that action is being seen and new partnerships are leading the way. The Yamoussoukro Decision, a document dating back to November 1999, was set in motion to liberalize African air services, which have operated under multilateral agreements set on a country-by-country basis. 

This has limited free movement of trade goods and air services across the continent. The implementation of policies such as the Single African Air Transport market (SAATM) and the African Continental Free Trade Area (AfCFTA), pick up where former efforts left off. This liberalization has alleviated restrictions on airspace, lessened tariffs and red tape, and potentially led to an increase in passenger volumes. 

Today, industry and airline executives agree that airline partnerships and mutual cooperation are prerequisites for emerging from the pandemic downturn with a stronger and better-connected African market that competes on an international level.

The African sector has responded with an increased urgency to augment infrastructure and personnel training. This also includes expanding the continent’s regional connectivity by adapting and modernizing its fleets to allow passengers wider access to more destinations through regional airports. 

A key motivator in this focus on regional operations is the projected population growth rate on the continent. Over the past 30 years, the African population has doubled, reaching 1.2 billion in 2015 compared to 550 million in 1985. By 2050, the population is expected to double again on the back of a growing middle class and projections of 26 African countries doubling their current population. 

Improved regulations are expected to enable greater air service efficiencies for the continent’s short to medium–haul fleets, which include regional aircraft types from manufacturers such as such as the Bombardier (Dash 8, CRJ900), Embraer (ERJ 145,190, E2), Boeing (737) and Airbus (A320). 

An efficient intra-African route network is within reach for the African market and consolidation seems to be tied to the narrative of unlocking air travel in the sector.

Regional partnerships taking form

At the 51st Annual General Assembly, which was held virtually in late October 2021, airline executives pushed forward the idea of unionizing resources and capacities as a solution to combat the sector’s fragmentation, stagnant regulations and excessive fuel costs. Alongside a fragmented airspace, other agitators of the continent’s fuel costs include minimal aviation fuel production/manufacturing on the continent, and an inadequate road network and road infrastructure. This poses a challenge to the efficiency of fuel deliveries, which are operated by trucks that utilize regional road networks. 

Price competition on the continent is also a concern as airlines group to unionize the sector. However, the sector's leaders suggest that the benefits would far outweigh the risks.

Thomas Kgokolo, the CEO of South African Airways, believes that airline subsidies may hold more benefits over capital injections, as the sector addresses low connectivity on the continent.

"Resource pooling could, therefore, help to stimulate the market, but of course one has to be careful of competition boundaries,” stated Kgokolo during a panel discussion at the AGA. 

In the industry, there is an emphasis on reforming African carriers' approaches in order to stimulate recovery in the market and step away from working in isolated bubbles.

Kgokolo added: “The post-pandemic recovery in Africa in terms of air traffic requires bold decisions. Our biggest challenge [in the region] is that we are now much more fragmented due to the impact of the pandemic and working in silos.” 

During the latter part of 2021, we have seen airlines position themselves to increase their operational capabilities and move to what seems to be economies of scale. 

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Unfolding in the form of non-exclusive partnerships, this could give airlines significant negotiating power and operational capabilities.

Today, South African Airways (SAA) and Kenya Airlines (KQ) have forged a partnership that will bring forward a pan-African airline in 2023 after signing a Memorandum of Cooperation (MoC) in November 2021. A partnership of this scale gives both airlines the benefits of increased finances and the operational expertise.

In the year 2020, KQ lost $333 million dollars, while SAA lost $341 million dollars. Despite the losses, both carriers are in the midst of a major restructuring. According to reports from the International Monetary Fund (IMF), the Kenyan government will withdraw its interest in nationalizing KQ and guarantee $750 million to pay off the carrier's debts as part of the restructuring, which is expected to cost up to $1 billion. Similarly, as part of the restructuring of SAA, the South African government committed to provide $729 million in state aid to the country's flag carrier to help it pay off its debts.

The partnership between the airlines increases stability and positions the carriers to further connect passenger volumes between East and Southern Africa and broaden the destination choices available to their passengers at competitive prices.

And the benefits do not stop at passenger flights. The partnership will also enhance trade on the continent.

With the AfCFTA in place, goods, trade and freight operations across the continent can be redefined to a global standard. Cargo volumes for African carriers are at about 26.7% above October, 2019 levels, according to IATA. An active cargo player, like Kenya Airways, widens and diversifies its operations across the continent with the backing of this partnership. 

The airline has also shown an intent to widen its export destinations in central Africa by enhancing its regional operations in the Democratic Republic of Congo (DRC) following a Memorandum of Understanding (MoU) signed with Congo Airways in April 2021. 

Similar partnerships between airlines have also been drawn up, aimed at connecting destinations across the continent. However, some airlines have turned to international partnerships to bridge the competition gap.

Partnering with international players

The sector dynamics in central Africa are an interesting angle to explore. While we’ve seen a number of collaborations between South and central African airlines, there are some African carriers who are joining forces with international players.

The realization of partnerships between African and international airlines is also gaining momentum as the sector consolidates. These African carriers are set to gain access to expertise, resources and an understanding about how to better position their business by tapping into the global networks and traffic of international players. In return, African carriers can offer greater connectivity options for global airlines looking to broaden operations on the continent.

The RwandAir and Qatar Airways partnership is a prime example of a mutually beneficial alliance between an African and international airline. Over the past two years, Qatar Airways has been focused on an expansion plan that involves broadening its footprint on the African continent. In December 2019, the middle eastern airline secured a 60% stake in Bugesera International Airport, a new airport under construction in Rwanda's capital Kigali. In February 2020, Qatar also confirmed its partnership with Kigali-based RwandAir after acquiring a 49% stake in the airline. Together, the airlines boast a network that covers more than 160 destinations, which are served through their main hubs in Doha and Kigali. After signing a codeshare agreement in October 2021, passengers on both airlines can connect to more than 65 destinations across Africa and globally.

The alliance between RwandAir and Qatar brings a new dynamic to the traffic flows in central and east Africa, which have been dominated by Addis Ababa-based Ethiopian Airlines, Nairobi-based Kenya Airways and Gulf carrier Emirates Airlines.

Qatar Airways gains a new channel to feed passengers to its own hub in Doha and to Kigali, while increasing its presence in Africa. RwandAir gains both a new partner and a well-established hub in the center of Africa, rivalling that of Ethiopian Airlines in Addis Ababa. 

Similarly, carriers in Northern Africa have shown interest in establishing ties with neighboring international airlines. As of October 2021, Royal Air Moroc and El Al have established a codeshare agreement to connect traffic from both of the carriers’ hubs. 

A partnership between Bahrain-based Gulf Air and Cairo-based Egyptair is planned in North Africa. In November 2021, the airlines revealed their interest in combining resources and cooperation for cargo, maintenance, personnel training and the airlines’ frequent flyer programs after signing a letter of intent to explore cooperation between the two carriers.  

During the peak of the COVID-19 pandemic, Cairo International Airport retained the most passenger traffic of any African airport, serving over 7 million passengers annually in 2020, down from 15 million pre-pandemic. This retained traffic is greater than the number recorded by former leading airports such as O.R Tambo International Airport and Bole International Airport. As part of a $1.1 billion dollar Airport Modernization Program, Bahrain International Airport opened a new terminal, which increases the airport’s capacity to 14 million passengers annually. The combined passenger traffic of Cairo and Bahrain looks like a promising incentive for a future partnership with Gulf Air and Egyptair.

However, a well-known regional airline is redefining its image on the continent by breaking away from its former identity as an affiliate of SAA. Established almost 30 years ago, South African airline Airlink has operated on a business model that fed inbound passenger traffic in South Africa to smaller hub airports as well as some larger airports. A partnership with South African Airways was established in 1995 and Airlink became somewhat of an affiliate feeder airline to SAA. Airlink’s ambition to expand will redefine its brand, not as a siloed entity, but rather as an airline open to multiple global partnerships. 

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Airlink has garnered a number of codeshare partnerships and interline agreements with the likes of Emirates, Ethiopian Airlines, British Airways, KLM, Qatar Airways, Virgin Atlantic, Air France, Delta, United, Lufthansa Airlines, LAM Mozambique Airlines and TAAG Angola Airlines. 

The airline’s former network pales in comparison to the hundreds of destinations and potential passenger traffic it will serve with its newfound partnerships as it emerges from the pandemic.

Is it too late or is this now the right time to consolidate?

To answer this question, we need to take a look at the environment the pandemic has created. 

Despite the downturn in traffic and enormous global losses, the pandemic has initiated a wave of restructuring and revision of airline governance across the majority of African airlines.

A number of African airlines are state-owned or partially state-owned, and have been subject to government influence. Even before the pandemic, bailouts were a common practice for airlines due to ill-management. However, while bailouts were necessary during the pandemic, they were only a temporary solution for most airlines. As a result, they were forced to rethink their operations models. Today, the sector is more welcoming to private investors and ownership in order to help rebuild and run their airlines, as seen with private entity Takatso Consortium and South African Airways.

So, how do we gauge the probability of success for the consolidation of state-owned, or partially state-owned, airlines in Africa? Well, a good starting point is Ethiopian Airlines.

The Addis Ababa-based airline has long led the standard for aviation on the continent, turning profits for a majority of the company’s existence. The airline’s ambition has been to establish plans for multiple hubs across the continent under its Vision 2025 multiple hub strategy. To achieve this, its growth plan has been focused on collaborating with African carriers to expand operations and connectivity on the continent, while sharing resources, expertise and capacity.

EA shares a number of ventures with airlines on the continent through ownership of equity stakes. Today, its airline network combines to serve South, South-East, Central and West and East Africa. 

In West Africa, EA holds a 40% stake in ASKY Airlines. Its 49% stake in Malawi Airlines and in Tchadia Airlines further boosts its Central and East African operations. This includes a 99% ownership of Ethiopian Mozambique Airlines and stakes in the national carriers of Guinea and the Democratic Republic of Congo. 

Ethiopian Airlines has also partnered with African governments to launch national carriers across the continent. Zambia Airways launched on December 1, 2021, with the backing of a joint venture between Ethiopian Airlines and the Industrial Development Corporation Limited (IDC), a government-owned financial institution based in South Africa. Both parties hold a 45% and 55 percent% stake in the airline respectively, and provide access to about $30 million in capital. 

Air Congo is another carrier set to launch in the Democratic Republic of the Congo (DRC) alongside existing national carrier, Congo Airways. A joint venture between the DRC’s Ministry of Transport, which holds 51% of Air Congo’s shares, and Ethiopian Airlines, which holds a 49% stake, will see the airline take to the skies in December 2021. The MoU signed between the parties will see Ethiopian Airlines share resources in the form of fleet capacity of a minimum of seven aircraft.

A majority of the Ethiopian Airlines’ stakes and ventures were established during the past five to 10 years, with the most recent occurring in the past two years. A key element in these ventures is the sharing of resources, capacity and expertise from EA to its partners. And with a fleet of more than 130 aircraft at its disposal, the reality of bringing forth a number of efficient aviation hubs across the continent is drawing closer.

Several factors control the success of a consolidated African market. Some of these aspects include liberalized skies and regulations and being open to private investment, including investment into infrastructure development, fleet modernization and personnel training. It will also require airlines to gain a greater understanding about how to better position their companies, and to no longer operate as extensions of a government with political motives.