Airlink stake strengthens Qatar's growth in Africa

Qatar is expanding aggressively into Africa. It is also currently finalising the acquisition of a 49 per cent stake in RwandAir and will have a 60 per cent stake in a new airport being built outside Kigali.

Africa is seen as the next big aviation growth opportunity. The African Airlines Association (AfRAA) said: “There was a six per cent increase from 15 million seats in June 2023 to 16 million seats in June 2024. Intra-Africa routes also saw a 0.5 per cent rise in seat availability during the same period, attributed to the introduction of new routes, network expansion, and fleet upgrades.”

Qatar currently offers 180 flights per week to various destinations across Africa. The airline’s investment in Airlink will enhance their existing code-sharing partnership. When code-share partners are included, the number expands to more than 900 weekly flights across the continent.

Speaking in July, Qatar Airways vice president for Africa, Hendrik du Preez, said: “With 18 per cent of the world’s population, and making up less than two per cent of air transport activity, Africa is an untapped market with increasing travel and business opportunities.

“We are expanding connectivity throughout the continent by increasing the number of destinations we serve, and the frequencies we offer, and through partnerships with African airlines.”

At the announcement in Doha, Qatar Group CEO, Badr Mohammed Al-Meer, said: “Our investment in Airlink demonstrates how integral we see Africa being to our business’ future. This partnership not only demonstrates our confidence in Airlink, as a company that is resilient, agile, financially robust and governed on sound principles, but also in Africa as a whole.”

Airlink chief executive Rodger Foster said: “Having Qatar Airways as an equity partner is a powerful endorsement of Airlink and echoes our faith in the markets we currently serve and plan to add to our network.

“This transaction will unlock growth by providing efficiencies of scale, increasing our capacity and expanding our marketing reach. By bolstering Airlink and its business, this investment will strengthen all of the existing airline partnerships Airlink has nurtured over the years.”

Airlink is a network route operator and thus well suited as a partner to Qatar. CEO Rodger Foster said that Airlink currently operates to 15 countries across Southern Africa.

“We are operating 85,000 flights per annum. This gives us the balance sheet to be able to continue upping our game, improving and expanding our network into destinations that we don’t currently operate. And, at the same time, intensifying everything that we do,” Foster said.

It is expected that the partnership will allow Airlink to more quickly expand its routes into Africa. Foster said: “We have unused traffic rights to Kigali, Kinshasa, Brazzaville, Libreville, and Accra. The partnership will enable us to adopt a step-by-step approach to expand our network. However we don’t at the moment have ambitions to become pan-African.”

Qatar Airways currently flies to 29 destinations in Africa and there’s been strong growth with new destinations added. Abidjan, Abuja, Accra, Harare, Kano, Luanda, Lusaka, and Port Harcourt are African cities recently added to the extensive Qatar Airways network.

Post-Covid, Airlink has been expanding into east Africa with services to Nairobi and Dar es Salaam. “The tie up with Qatar will give us a larger presence in Central Africa,” Foster said.

“We have 35 other commercial airline relationships and the aim with the Qatar deal is to bolster Airlink’s position in the sub-region. We also want to enhance the connectivity that we already enjoy with those 35 airline partners.”

Foster emphasised that the Qatar partnership will not result in immediate changes. He said: “We will focus on what we are doing – be the best version of ourselves that we possibly can be – that whatever we do is to the best of our ability, which means enhancing the frequencies to key destinations throughout our network and making sure that we are providing connectivity, especially to Qatar; but not limited to Qatar.”

It is not expected that the deal will be subject to significant regulatory hurdles. South Africa limits foreign (non-resident) shareholdings in South African airlines to 25 per cent. Foster points out that the Qatar 25 per cent shareholding does not change the control of the airline and that there need therefore be no lengthy approvals process from the Civil Aviation Authority for an amendment to the airline’s Air Operator’s Certificate – nor to its local and International Air Services Licensing Council permissions.

However, Foster pointed out that “nothing is irrevocable until all of the conditions precedent have been concluded. There are one or two conditions precedent that are outstanding at the moment.”

One of the hopes for the partnership was that Airlink would be able to bulk-up its existing routes and up-gauge to single-aisle narrow-body airliners, such as the Airbus A320 family or Boeing 737s.

This would then enable it to achieve hitherto elusive economies of scale and so bring its seat prices down far enough for it to compete on busy routes with the low-cost carriers such as FlySafair and Lift.

Notably too, Qatar finds itself with a surplus fleet of nine Boeing 737 Max8s, which already have a two-class cabin configuration. With their improved per-seat fuel economies over FlySafair’s Boeing 737-800s, they would be ideal to increase capacity on Airlink’s busier routes.

When asked if Airlink will now start competing in the very competitive low-cost carrier space in South Africa, Foster said that the two airlines business models are different, but converging.

“If we look at our business model, we are premised on a network carrier model of connectivity and on having reach into all the corners of the Earth through airline partnerships, through IATA clearing houses, the settlement plan systems and so on.

“We have to be in the global distribution system, and we have to be in an inventory-hosting system for every flight, multiplied in Airlink’s case by 85,000 flights a year, for up to a year in advance,” Foster said.

He explained that FlySafair and Lift operate a point-to-point and not a network-carrier model.

“We are a connecting service provider, or what we call a network-airline service provider. So Qatar will connect the dots of our network to the dots of their network in a comprehensive way to create a matrix of destinations served both by our network, through our hubs, Johannesburg and Cape Town, as well as their hub, which is Doha.

“The low-cost carriers haven’t relied on connectivity to the extent that we have, and they sell to the travelling public who need to go from Johannesburg to Cape Town, or from Cape Town to Johannesburg, and not to destinations beyond either of those two.

“Whereas everything that we do is about picking up a customer in a source market like Cape Town, and then flying them either on our own system or on the systems of our partner airlines to another destination, be it within the sub-region or anywhere else in the world.”

The Qatar Airlink tie-in has been in the making for a while. Foster said: “The negotiations started in earnest probably two years ago. The due diligence started around about a year ago and was concluded about six months ago.”

The acquisition announcement ended months of speculation after Qatar announced in May that it would be investing in a Southern African airline. South African Airways is known to be looking for a strategic equity partner so it was considered to have been the likely partner. Angola’s TAAG was also considered a likely candidate.

When asked about the value of the transaction, Foster said: “Airlink is a private company, and given the fact that Qatar Airways is an organ of the state of Qatar, it’s not something that we can divulge.”