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KQ Floats Idea Of SAA, ET And KQ Merger  
User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 734 posts, RR: 0
Posted (1 year 9 months 3 weeks 3 days 3 hours ago) and read 4629 times:

Report in CAPA talks of an idea the CEO of Kenya Airways presented at the recently concluded African Airlines Association General Assembly to merge Sub Saharan Africa Big Three (SSA3 anyone) - South African Airways, Ethiopian Airlines and Kenya Airways.

Full article:
http://centreforaviation.com/analysi...rt-of-push-for-greater-unity-89947

I believe this has little chance of ever taking flight; too many issues to sort out - shares each country gets, labor, pushback from other countries, etc. And it would probably be a bad idea as it may limit intra African flight options and hence would mean increased fares.
What do you guys think?

12 replies: All unread, jump to last
 
User currently offlinejfk777 From United States of America, joined Aug 2006, 8375 posts, RR: 7
Reply 1, posted (1 year 9 months 3 weeks 3 days 1 hour ago) and read 4396 times:
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This is an interesting idea, Kind of a LATAM for Africa. Ideally an airline in Nigeria would be included. A merger between Star Allinace members SAA and Ethiopian would be a good start. Kenya Air's Nairobi hub is probably to close Addis Abbaba to be of any value to ET or SAA. These two could control Southern Africa and Eastern Africa which is about two thirds of the market.

Ethiopian has a new partner in west Africa which could be that regions airline in such an airline group, name it African Airlines Group(AAG).


User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 734 posts, RR: 0
Reply 2, posted (1 year 9 months 3 weeks 3 days ago) and read 4286 times:

Quoting jfk777 (Reply 1):
This is an interesting idea, Kind of a LATAM for Africa. Ideally an airline in Nigeria would be included. A merger between Star Allinace members SAA and Ethiopian would be a good start. Kenya Air's Nairobi hub is probably to close Addis Abbaba to be of any value to ET or SAA. These two could control Southern Africa and Eastern Africa which is about two thirds of the market.

Ethiopian has a new partner in west Africa which could be that regions airline in such an airline group, name it African Airlines Group(AAG).

  and they will have to work on the new name - LATAM was just perfect.

Speaking of LATAM, that is the first name that crossed my mind when I read this article.

I think even a SAA + ET merger is unlikely. A better model IMHO is to create something like LAN did, a bunch of country based subsidiary that it owns (some more than others) so that it satisfies the big egos of small countries but can also extend beyond a single country or region. For instance, have a ASKY Togo, ASKY Congo, ASKY (fill in your country name) which can be owned by governments, private investors, etc.) They could even acquire some carriers like Air Malawi and re-brand them under the new franchise brand. Just a thought...


User currently offlineAF022 From France, joined Dec 2003, 2162 posts, RR: 1
Reply 3, posted (1 year 9 months 3 weeks 2 days 22 hours ago) and read 3983 times:

Let's replicate the chaos of Air Afrique, shall we?

ET is doing great, KQ is fine, SAA is falling apart. Why would these carriers merge?


User currently offlinejfk777 From United States of America, joined Aug 2006, 8375 posts, RR: 7
Reply 4, posted (1 year 9 months 3 weeks 2 days 22 hours ago) and read 3943 times:
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Quoting ETinCaribe (Reply 2):
I think even a SAA + ET merger is unlikely. A better model IMHO is to create something like LAN did, a bunch of country based subsidiary that it owns (some more than others) so that it satisfies the big egos of small countries but can also extend beyond a single country or region. For instance, have a ASKY Togo, ASKY Congo, ASKY (fill in your country name) which can be owned by governments, private investors, etc.) They could even acquire some carriers like Air Malawi and re-brand them under the new franchise brand. Just a thought...

In the countries that do have decent airlines like Kenya and Ethiopia would they allow a second airline to cannibalize the old airline ? NO, and would it be worth to set up an airline in say Tanzania or Ghana as substitiute hubs for Lagos and Nairobi ? Hard to say. Its probably going to be 10 years before we see a LATAM typr mega airline group in Africa. One airline would still have to set up an airline in another country as a first step. The recent history if this in Africa has been dissapointing.


User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 734 posts, RR: 0
Reply 5, posted (1 year 9 months 3 weeks 2 days 22 hours ago) and read 3903 times:

Quoting AF022 (Reply 3):
Let's replicate the chaos of Air Afrique, shall we?

The differences here (and there should be many) is that each entity would have its own ownership structure, so it would be one brand name with many franchises, thus would not be like "Air Sans Fric" which was a commonly owned entity.

Quoting AF022 (Reply 3):
ET is doing great, KQ is fine, SAA is falling apart. Why would these carriers merge?

At least KQ seems to think they cannot do well anymore w/o bulking up. They lost $77M in the fist 6 months of this year. And ET's CEO did not pour cold water on the idea either... Again, I think this is not going to happen...

Quoting jfk777 (Reply 4):
In the countries that do have decent airlines like Kenya and Ethiopia would they allow a second airline to cannibalize the old airline ?

Kenya is a fairly accessible market with several players involved. ET is no doubt protected by the government, which puts it ahead of consumers' interest.


User currently offlineByrdluvs747 From United States of America, joined Jul 2004, 2360 posts, RR: 1
Reply 6, posted (1 year 9 months 3 weeks 2 days 14 hours ago) and read 3568 times:

I don't see the South African government surrendering any control of SAA.

What alliance would they all belong to? Would there be any competition objections from govts in the EU and South Africa?



The 747: The hands who designed it were guided by god.
User currently offlineswallow From Uganda, joined Jul 2007, 555 posts, RR: 0
Reply 7, posted (1 year 9 months 3 weeks 2 days 7 hours ago) and read 3331 times:

SAA tried setting up an East African hub in the mid-nineties, using Y2, a joint venture between SAA, Uganda airlines and Air Tanzania. Y2 collapsed after 5 years of operations.

SA then purchased shares in TC in 2002, but that joint venture collapsed in 2006.

So the dream of an East African hub died. KQ was way more efficient at serving the market.

SA now wants to try her hand at a West African hub. Let's see if that will be successful

There are certainly economic benefits to be had with an SA, KQ and ET merger. Whether the cultural and management differences between SA and KQ/ET can be overcome is another matter. Besides, there is overlap between the KQ and ET networks, which reduces the synergies of a merger.

I'd say they don't have much time to think about it given the increased coverage of the continent by QR, TK and EK. The African market is too fragmented, and a house divided cannot stand.

SA is in trouble. It is being smoked by EK on JNB/CPT/DUR-DXB, BA on JNB/CPT-LHR, and KQ on JNB-NBO. They have done well to develop S. America and China routes.

After taking disrupting the Australian and European air transport markets, Africa is the next target of the ME big 3 + TK



The grass is greener where you water it
User currently offlineavek00 From United States of America, joined Oct 2004, 4387 posts, RR: 19
Reply 8, posted (1 year 9 months 3 weeks 2 days 5 hours ago) and read 2792 times:

Quoting ETinCaribe (Thread starter):
What do you guys think?

Anything approaching a pan-African airline would be at least as nightmarish an organization as SAS, but without wealthy nation-states to keep bailing it out.



Live life to the fullest.
User currently offline2travel2know2 From Panama, joined Apr 2010, 2628 posts, RR: 1
Reply 9, posted (1 year 9 months 3 weeks 2 days 3 hours ago) and read 2275 times:

Quoting jfk777 (Reply 1):
This is an interesting idea, Kind of a LATAM for Africa.

If it's because how close NBO and ADD hubs are, then it'd be more like AV-TA of Africa..
But if it's about SA looking for a hub in North (east) Africa then the LATAM compassion is a good one. Like LA SCL hub far south, SA JNB is of limited potential use as a major north-to-south hub.

I thought of KQ and perhaps ET to be somewhat like the CM of Africa and concentrate itself in a massive one-hub operation independent (but in an alliance) airline.



I'm not on CM's payroll.
User currently offlineSepulTALLICA From Niger, joined Sep 2009, 222 posts, RR: 0
Reply 10, posted (1 year 9 months 3 weeks 2 days 2 hours ago) and read 2042 times:

ET - Ethiopian government protects it both domestically and internationally (though next year there is talk of liberalizing the domestic Ethiopian market in preparation for a gradual international liberalization at some stage) though does not interfere in the company's running.

Also, Ethiopia is on the ball infrastructure wise. A new international airport outside Addis is due to be built in the next 5 - 10 years in anticipation of ET's expansion and Ethiopia's ever growing economy.

KQ - privatized though the Kenyan gvt is likely to take a majority shareholding in the near future. Whilst there is no direct interference with the company's decision making process, should gvt become a majority shareholder, expect to see more politically motivated decisions and appointments being made. It will be interesting to see who gets voted to succeed CEO Titus Naikuni once he leaves next year.

Infrastructure wise, Kenya is the stereotype of African governance - infighting, squabbles, massive delays and allegations left right and centre of corruption in the construction of JKIA's new Greenfield Terminal and T4. This will most likely prove to be a major hindrance to KQ's expansion plans in the future.

SA - government begging bowl syndrome. Whilst it is a privatized corporation, GVT holds 100%, meaning every action has to be approved by bureaucrats. SAA has to comply with gvt policy, which in Minister Gigaba's case is about becoming a more Afro-centric carrier. In the day and age of EK, QR, BA etc undercutting SAA on fares internationally and domestically, a more Afro-oriented carrier may not be such a bad idea for long term survival.

Infrastructure wise, SA is moving with the times and has kept up, though ACSA's high fees could hurt in the long run.

In Africa its not only a question of the carrier, but of government policy too. Look at CEMAC - the Confederation of Central and West African states trying to launch their regional carrier Air CEMAC - 10 years as a paper airline all because some hick countries couldn't agree to taxation and overflight permissions..



Chinokanganwa idemo; Chitsiga hachikanganwe. ✈
User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 734 posts, RR: 0
Reply 11, posted (1 year 9 months 3 weeks 2 days 2 hours ago) and read 2016 times:

Quoting SepulTALLICA (Reply 10):
ET - Ethiopian government protects it both domestically and internationally (though next year there is talk of liberalizing the domestic Ethiopian market in preparation for a gradual international liberalization at some stage)

Hello SepulTALLICA.
I am in the pessimist camp on this one. They will drag their feet for as long as they can and it looks like they have a long runway... Recently, Etihad's planned service to ADD was postponed (canceled??) b/c they could not get the necessary approvals from ECAA. I have not heard of the reasons why, do you?

Quoting SepulTALLICA (Reply 10):
Infrastructure wise, Kenya is the stereotype of African governance - infighting, squabbles, massive delays and allegations left right and centre of corruption in the construction of JKIA's new Greenfield Terminal and T4. This will most likely prove to be a major hindrance to KQ's expansion plans in the future.

This reminds me of an article about India and China a few years ago. Both countries' economies were on a tear at the time. The comment that stuck was that China's economy is booming because of the govt while India's was IN SPITE OF their govt. Somewhat similar to the Ethiopia and Kenya situation.


User currently offlineSepulTALLICA From Niger, joined Sep 2009, 222 posts, RR: 0
Reply 12, posted (1 year 9 months 3 weeks 1 day 22 hours ago) and read 1867 times:

Quoting ETinCaribe (Reply 11):
Hello SepulTALLICA.
I am in the pessimist camp on this one. They will drag their feet for as long as they can and it looks like they have a long runway... Recently, Etihad's planned service to ADD was postponed (canceled??) b/c they could not get the necessary approvals from ECAA. I have not heard of the reasons why, do you?

Caribe what's going on mayne? Long time no chat!

In all honesty, I share your pessimism too (and it pains me to do so but experience has taught me to never trust African politicians who always say they'll do such and such    )

Etihad claims ADD got canned due to the "Ethiopian Civil Aviation Authority rejecting the airline’s application for the required operating permit, despite the existence of a Memorandum of Understanding concluded by the governments of Ethiopia and Abu Dhabi in June 2007. "

Quoting ETinCaribe (Reply 11):
This reminds me of an article about India and China a few years ago. Both countries' economies were on a tear at the time. The comment that stuck was that China's economy is booming because of the govt while India's was IN SPITE OF their govt. Somewhat similar to the Ethiopia and Kenya situation.

Yes very true man. Kenya does seem to be heading in the right direction, but ever so slowly. Its a pity that everytime a new government comes to power in Africa, their first priority is "eating" i.e 'gettin paid' as opposed to actually getting sh*t done.

Ethiopia on the other hand is going full steam ahead from what i have seen. With all the infrastructural developments (hydroelectric dams, railways, mines, highways etc) going on, they're going to need an equally big airport capable of handling not only transit hub passengers, but also an influx of visitors to the country.

Fingers crossed man - i really hope to see the Horn of Africa develop after so many years of chaos, war and idiot Communists/Islamic extremists - especially Somalia. So much potential there.



Chinokanganwa idemo; Chitsiga hachikanganwe. ✈
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