I recently wrote about how Qatar Airways is planning on investing in two airlines in Africa, in order to boost its network there. We know that Qatar Airways intends to invest in RwandAir, as Qatar’s government also owns a majority stake in the country’s new international airport.
However, up until now, we could only speculate as to what the other airline is. Well, now we know, as reported by the Financial Times.
Qatar Airways is reportedly closing in on a deal to buy a stake in Airlink, which is South Africa’s largest regional airline. While no final deal has been reached, the two parties are apparently very close to an agreement.
Qatar Airways CEO Badr Mohammed Al Meer has repeatedly said that southern Africa is the “missing part of the equation” in the carrier’s global route network, as the airline hopes to boost regional connectivity.
For those not familiar with Airlink, the airline operates a fleet of roughly 65 regional jets, ranging from the Embraer E135 to the Embraer E195. The airline flies to 45 destinations in 15 countries in sub-Saharan Africa. The airline is also profitable, which is quite an accomplishment for the region, given how many airlines there are continuing to sustain losses.
As you’d expect, though, Qatar Airways’ motivation to invest in Airlink is primarily strategic, and not financial, and is intended to expand Qatar Airways’ reach in the region. The goal would be to deliver benefits in terms of increased traffic, broader and deeper market reach, lower distribution costs, and better financing opportunities when ordering aircraft.
The one challenge is that South Africa’s air licensing rules stipulate that international airlines based in South Africa must be “substantially” owned by residents. So obviously Qatar Airways couldn’t take full ownership of the airline, but rather would have to be a partner.
Usually I’m really skeptical of airlines investing in other airlines, especially when we’re talking about Gulf carriers. I mean, Etihad’s track record of investing in airlines is comically bad, to the point that it would’ve been more efficient to just throw billions of dollars into a furnace. Meanwhile Qatar Airways’ Air Italy investment several years back ended up in liquidation for the airline.
What do I make of this prospective investment? I guess my first question is what Qatar Airways would really gain by investing in Airlink, rather than just continuing to partner with the airline? The airlines already have a codeshare agreement, so Qatar Airways can get traffic from Airlink.
I suspect part of the motivation may be to better optimize Airlink’s schedule to tie into Qatar Airways’ route network. And perhaps the goal is also to expand Airlink, with Qatar Airways providing financing of newer and larger aircraft.
At the same time, Airlink is currently profitable precisely because the company is so conservative and measured with its growth. The airline is focused on having a sustainable business model, rather than on being flashy.
For example, Airlink’s average fleet age is nearly 18 years old. While newer generation jets would offer better economics in terms of fuel burn, it would be significantly more expensive to operate them.
Is the goal to just have Airlink increase feed to Qatar Airways’ gateways in southern Africa? Or could the goal be for Airlink to get planes that can fly to Doha, and then connect into Qatar Airways’ network?
I’m very curious to see how this plays out, as it could go several different directions. As I’ve said several times, I’m very impressed by Qatar Airways’ new CEO. Al Meer seems motivated not by prestige or ego for his national carrier, but rather by running a good business. So I certainly have a lot more faith in an investment that he signs off on than some other former Gulf region executives.
Qatar Airways is reportedly nearing a deal to invest in Airlink, South Africa’s largest regional airline. While Qatar Airways already has a partnership with Airlink, it seems the goal is to strengthen that even further.
I’d be fascinated to see what a deal looks like. Airlink has actually been pretty consistently profitable, precisely because the airline has been so conservative with its fleet, network, etc. I wonder how an investment could change the carrier’s strategy.
What do you make of the prospect of Qatar Airways investing in Airlink?
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