Thursday, December 13, 2012

■ ETHIOPIA: Ethiopian Airlines shoots down Kenya Airways mega-merger idea as SAA now sets sights on dominating the African market.

Ethiopian Airlines (ET) has, for want of a better term, "shot down" a proposal by Kenya Airways' (KQ) outgoing CEO Titus Naikuni regarding a possible mega-merger between Ethiopian, Kenya Airways and South African Airways, as being impractical.

During the 44th Annual General Assembly of the African Airlines Association (AFRAA) held in Johannesburg in late November, Naikuni went on record proposing the creation of a large African airline capable fighting back against large foreign carriers - Emirates, KLM/Air France, British Airways - which currently dominate Africa's international market.
What we need to do is, we need 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.
Source [EthioSports]

Whilst Ethiopian boss Tewolde Gebremariam originally agreed in principle to the proposal, in an interview with the Associated Press, Yissehak Zewoldi, Vice President for Alliances & Corporate Strategic Planning at Ethiopian Airlines, stated that the advantage of increased scale would be positive but that a merger is not likely owing to its lac of practicality:
Yissehak Zewoldi
"Big is always good. You can achieve better results in competitiveness and cost reduction by working together, so the merger idea is theoretically good and we looked at the idea," Zewoldi said as the airline celebrated its one-year membership in the Star Alliance.

"But it won't go beyond that. Its practicality is highly doubtful," he said.
Source [AFP]

Additionally, Zewoldi said that the issue of airline alliances would also come into play as both Ethiopian Airlines and South African Airways belong to Star Alliance, whilst Kenya Airways is a member of SkyTeam.

No comment thus far has been heard from SAA's interim CEO Vuyisile Kona. Any inkling on possible South African involvement in the initiative was dealt a blow when South African Minister of Public Enterprises, Malusi Gigaba, on Tuesday said Africa would become South Africa’s airline industry’s primary target and planned to “dominate” the continent’s airline industry.
Malusi Gigaba
We need to dominate the African market. We need to provide high quality service to our African customers that will make them appreciate and love the airline,” added Gigaba.
Source [VenturesAfrica]

He said the state-owned airline, South African Express, intended to aggressively expand into the African continent while South African Airways (SAA) and SA Express would diversify routes to places such as Mozambique, Tanzania, Angola and Ghana which have been identified as high growth areas.