Explained: Ethiopian - Nigeria Air deal will hit Kenya Airways
As Kenya Airways continues to extend begging bowls to the government to pump in more billions to help it pull out of a major financial crisis, its main African rival Ethiopia Airlines is plotting to wrestle the lucrative West African market as it moves to extend its dominance beyond the region.
This is after Ethiopia Airlines, which is now Africa's biggest, won a bid to become the lead technical partner in Nigeria Air, in which it will become the single biggest shareholder. Ethiopia and its partners in the deal plan to take over Nigeria Air and build a travel hub in Lagos to serve the West African market.
Ethiopian Airlines will own a 49 percent stake in the new Nigeria airline, while the Nigerian Sovereign Fund will take 46 percent. The remaining five percent will be owned by the Nigerian federal government, according to a deal reported by news agency Reuters.
The deal will now give Ethiopia Airlines a home advantage to fight Kenya Airways which has been one of the biggest beneficiaries of the collapse of Nigeria Air almost two decades ago under a cloud of debt, mismanagement and corruption.
Nigeria is the biggest aviation market in West Africa and winning the market gives any carrier a numbers advantage.
Under the deal, the new airline will be launched with three Boeing 737-800 planes and the group plans to own 30 jets and operate international flights in two years.
The Nigeria deal is the latest acquisition of continental carriers.
Ethiopian Airlines Group owns 24 percent shareholding in African sky (ASKY) based in Lomé Togo, 49 percent shareholding in Malawi Airlines based in Lilongwe Malawi, 45 percent of Zambia Airways, 49 percent shareholding Tchadia airlines 99 percent shareholding Ethiopian Mozambique Airlines LTD, and 51 percent Shareholding DHL-ET Logistics Services.
The Airline wholly owned by the Ethiopian Government flies over 127 international routes, more than 62 destinations in Africa and 22 domestic locations.
The airline has been expanding its network from the Chinese city of Chongqing, flights to Garowe and Bosaso, Somalia, operations to the City of Beira in Central Mozambique, Athens, Bangkok & Hanoi and started flight Services to India, adding Bengaluru to its network.
It has overtaken the Pride of Africa, Kenya Airways which now flies to 42 destinations worldwide, 35 of which are in Africa.
Ethiopia has taken the fight to West Africa which is shaping as the next frontier for competition among Pan African airlines with struggling State airlines KQ and South African Airways also keen on the route under their plan to build a Pan African franchise.
KQ which narrowed its net loss for the year ended December by 56.58 percent to Sh15.8 billion has been making inroads into the giant market, but currently lacks the financial muscle to compete Ethiopia flight by flight. KQ inked a codeshare agreement with Africa World Airlines, a West African regional airline operating out of Ghana, to expand joint reach in the domestic, African and international routes.
"Our combined networks will allow our customers the convenience of seamless onward connectivity to and from the Kenya Airways network onto Africa World Airlines' network. It is imperative that we continue to interlink Africa and allow access within Africa for our passengers," said Adedayo Olawuyi, head of the commercial for Africa World Airlines in a statement.
The West African market has been important to the Kenyan Airline and the Ghana deal will make it easy for the KQ customers to access Accra directly from Nairobi as well as ply West Africa and international routes jointly, is seen as a move to consolidate the region.
Africa's most populous country's previous national carrier, Nigeria Airways, was founded in 1958 and wholly owned by the government but ceased to operate in 2003.
Nigeria has been seeking to set up a national carrier and develop its aviation infrastructure - currently seen as a barrier to economic growth - to create a hub for West Africa.
Ethiopia’s entry through Nigeria offers a big market to the growing airline although the market is difficult since Lagos is not a preferred transit point, with forex control challenges that make getting money out harder.
But Ethiopia Airlines, which operates in a similar environment at home is not fazed, it has an advantage over the competition being among the few airlines in the world which turned a profit in 2020 despite the Covid-19 pandemic.
At the peak of the crisis, the company prioritised the air cargo business and refitted passenger aircraft into cargo planes.
This model has enabled the airline to transport medical supplies, partnering with the World Health Organisation, the United Nations and the Chinese giant Alibaba in the global distribution of Covid-19 vaccines.
Both KQ and SAA, on the other hand, are sagging from multiyear losses and grinding through bureaucratic hoops to set up their Pan-African franchise.
Ethiopian Airlines Group which was originally established in June 1945 comes in with a profitable financial position and strong backing from its government.
Its main hub Addis Ababa is very well located for the traffic between Intra Africa-India/South Asia and Latin America-India/South Asia.
The versatile airline follows a multi-business model to get the advantage of routing customers through Bole Airport where passengers pass through the main hub Addis Ababa and layover and connect to the next flights or even stay near to the airport at its Skylight Hotel.
The company has also invested heavily in its digital transformation driving spending of more than Sh4.8 billion ($40 million) between 2015 and 2020 to increase online sales.
Ethiopia recently signed up a Kenyan-based travel technology company AfroAtlas deliver the airline’s New Distribution Capability (NDC) platform, which is a travel industry-supported programme launched by the International Air Transport Association (IATA) for airlines to create and distribute relevant offers to customers.
NDC content has become popular among airlines globally due to personalised shopping experience, pricing autonomy, discounts and ancillaries among others.
Afro Atlas has partnered with over 400 travel suppliers including Car rentals for transportation and Expedia, an American online travel company.
