KQ drops sale deal with Delta for South Africa Airways venture
Saturday April 01 2023
Kenya Airways may have ditched a sale deal with American firm Delta Airlines to concentrate on a business arrangement with South Africa Airways.
This week, the Kenyan flag carrier reported a Sh38.26 billion ($29 million) net loss for the full year to December, the worst-ever in its decade-long loss-making streak.
President William Ruto had met top executives of Delta Airlines in December during his trip to the US, where he launched the government bid to sell its entire 48.9 percent stake in KQ.
But during the investor briefing this week, KQ chairman Michael Joseph said there were no plans to close the deal with Delta. Instead, the airline will focus on seeking potential investors including Delta, as well as strengthening the SAA deal.
No firm plans yet
“We continue to talk to potential investors but no firm plans yet and as I said, we are working closely with the government of Kenya,” said Joseph.
“There is no plan to offload shares to Delta at all and as Allan (Kilavuka, KQ CEO) said, cooperation with South Africa Airlines is continuing and improving and moving it to the next level; we are very happy with the cooperation so far.”
When he met the Delta team in Washington DC on the side-lines of the US-Africa Leaders’ Summit, President Ruto, had expressed desire to sell off the ailing carrier.
“The government is looking for partnerships that will make Kenya Airways a profitable entity whatever that means, in whatever configuration, whatever form it takes,” President Ruto had said.
Focus on SAA
But now it appears KQ would like to consolidate its business and concentrate on the SAA deal.
Kenya Airways and SAA signed a Strategic Partnership Framework in November 2021, touted as a key milestone towards creating a pan-African airline.
The two anchor partners have set themselves the ambitious target of establishing the structure of the new group holding company by end of 2023.
Fragmented aviation market
“For SAA we are doing it because overall we want to consolidate what is perceived as the fragmented African aviation market,” said Allan Kilavuka, KQ managing director and chief executive.
“And why are we doing it? To bring together like-minded airlines that will help connect more people and overall reduce costs of operation.”
He said South Africa is a natural partner due to its physical and geographical position on the continent as a hub.
“We will obviously be looking at other potential partners including West Africa carriers who are willing to join this pan African airline discussion,” Kilavuka said.
The growth of the partnership will see the addition of Zanzibar, Kilimanjaro, Juba, Douala, Lusaka, Ghana and Nigeria as the two carriers seek to offer more options for travelers.
KQ reported a 141.77 percent drop in losses from Ksh15.8 billion ($119.33 million) posted in 2021, surpassing the Ksh36.2 billion ($273.41 million) loss booked in 2020 when global aviation operations were grounded during the peak of the Covid-19 pandemic.
KQ’s management has blamed increased fuel costs, foreign exchange losses caused by the weakening of the Kenyan currency and a Sh18 billion ($135.85 million) one-off loss incurred when the government took over a dollar-denominated facility.