Airlines that have successfully overcome the Covid-19 pandemic-induced plunge in passenger traffic, revenue losses and closures, have done so in part by striking clever strategic partnerships, tie-ups and mergers.
While many airlines have never recovered from Covid-19, others that struck partnerships to share capacity, costs and risks, have often not only achieved full financial recovery but have also surpassed their pre-pandemic performance.
As South African Airways and many domestic and African airlines struggle to overcome the Covid-19-induced challenges, while having to deal with an array of new ones — such as new aviation regulatory regimes fluctuating fuel prices worsened by the impact of Russia’s invasion of Ukraine and the Middle East conflict, and changing consumer preferences — strategic partnerships emerge as pivotal mechanisms to bolster sustainability.
European airlines, in recent times, have struck partnerships with peers to enhance connectivity, optimise operations, and expand their market presence. In the Middle East, Qatar Airways has introduced the partnership model with stunning effect. The benefits of these partnerships are most evident in economies of scale. Airlines can negotiate more favourable pricing when making bulk purchases for aircraft, fuel, maintenance and other supplies.
The US aviation market is the biggest in the world. Many airlines throughout its history — and they continue to do so, have merged out of necessity or to simply stay competitive. Recently, Alaska Airlines decided to merge with Hawaiian Airlines, in a calculated move to ensure it is a competitive player in the key aviation markets between Hawaii, the mainland US and the Asia-Pacific region.
By merging, these two airlines aim to pool their resources, expand their route networks, and enhance consumer offerings while fending off pressure from the American big three carriers — American Airlines, Delta, and United. The merger highlights the growing trend of airlines partnering up to weather the turbulent aviation industry together.
In the highly competitive European aviation market, strategic partnerships have become essential for airlines to maintain their edge and adapt to changing dynamics. The International Airlines Group (IAG is a British-Spanish partnership between British Airways and Iberia, in which the two companies became wholly owned subsidiaries of IAG. The group owns Fly Level, marketed as LEVEL, an airline brand which operates low-cost flights. IAG also owns the IAG rewards programme.
In 2013, IAG made headlines with one of the largest orders for Airbus A320neo aircraft, purchasing a total of 220 units. The list price for each Airbus A320neo is about $110m. Because of its significant bulk purchase, IAG was able to negotiate a substantial discount, estimated at about 15% off the list price. This effectively reduced the cost per aircraft to about $93.5m.
The financial impact of this deal was considerable. For the entire order, IAG saved about $3.6bn based on the total list price of $24.2bn. After the bulk purchase by IAG, the group allocated the appropriate aircraft to fit the needs of its member airlines.
The Middle East over the past few years has increasingly come to play a crucial role in global aviation due to its strategic geographic position. This central location has enabled the growth of major airlines with significant global reach, such as Qatar Airways. While Qatar Airways, like SAA or other airlines, faces similar financial, fuel price and cost challenges, its strategic partnerships have helped it navigate these issues more effectively than SAA.
A major Covid-19-related challenge for airlines has been a dearth of aircraft availability due to supply chain disruptions, which have undermined the sustainability of many airlines. For instance, the Lufthansa Group in 2023 reported a half-year loss of €427m , which the company largely attributed to aircraft delivery delays.
Qatar Airways is part of the Oneworld Alliance, which includes Finnair, Royal Air Morocco and Qantas. Qatar Airways particularly used its strong strategic partnerships with its fellow Oneworld Alliance members to helped mitigate aircraft delivery delays, to share routes and to share costs.
Finland’s Finnair partnered with Qatar Airways to adjust its network strategy due to closure of Russian airspace which has made the airline’s top routes far less feasible, This partnership sees Finnair offering direct flights from major Scandinavian capitals to Doha. Finland is a neighbour to Russia, which is at war with Ukraine.
SAA, domestic South African airlines and African airlines can learn from global practices by forming strategic alliances to enhance market reach, boost operational efficiency, share costs and improve services.
Similarly, Qatar Airways partnered with British Airways to operate flights from London Heathrow and Gatwick to Doha, the capital of Qatar. American Airlines in its new service from New York JFK to Doha also partnered with Qatar Airways. Finnair, British Airways and American Airlines use their own aircraft in their route partnerships with Qatar Airways.
SAA, domestic South African airlines and African airlines can learn from global practices by forming strategic alliances to enhance market reach, boost operational efficiency, share costs and improve services. Joint ventures, mergers and route sharing are critical. African airlines should be leveraging economies of scale by bulk buying aircraft together, and sharing routes and services.
Ethiopian Airlines rightly proposed a joint venture with the Nigerian government to operate a new proposed Nigerian airline, in which Ethiopian Airlines owns 49%. Though Ethiopian Airlines sank considerable investment in the proposed joint venture, it fell apart because of local Nigerian opposition to foreign ownership.
The Nigerian government-Ethiopian Airlines collaboration could have modernised Nigeria's ageing aviation sector by integrating it into Ethiopian Airlines' global network and operational expertise. This would have improved connectivity, service quality and operational efficiency, potentially reducing costs and enhancing competitiveness for Nigerian airlines.
Kenyan Airways proposed in 2021 a pan-African strategic partnership with SAA. However, it never gained traction, mainly because of SAA’s governance, operational and direction struggles. Similarly, the SAA-Kenya Airways partnership, if pulled off, could expand route networks and enhance connectivity across Africa and internationally for both airlines.
By pooling resources, African airlines can optimise operations, share costs, and negotiate better terms with suppliers. African partnerships could also improve service offerings, improve quality, streamline flight schedules, and foster economic growth within the region. Together, successful African aviation collaborations could modernise Africa’s aviation industry, reduce prohibitive costs, expand the aviation sector and help African airlines compete more effectively in the global market.
Emil Gumede is an aviation economics analyst based at the University of Sussex.
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