Qatar Airways is currently in the process of strategically investing in a few airlines. The first of those deals has been announced today, as the Doha-based airline is taking a stake in a major South African airline.
Qatar Airways finalizes investment in Airlink
Qatar Airways has purchased a 25% stake in Airlink, which is South Africa’s largest regional airline. The stake has been purchased for an undisclosed amount of money.
For Qatar Airways, the goal is for this investment to help the airline boost its regional connectivity, through an enhanced codeshare agreement and a loyalty collaboration.
Here’s how Qatar Airways CEO Badr Mohammed Al Meer describes this development:
“Our investment in Airlink further 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, showing huge potential that I am delighted we are able to help start realising.”
Meanwhile here’s how Airline CEO Rodger Foster describes this news:
“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.”
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 is to deliver benefits in terms of increased traffic, broader and deeper market reach, lower distribution costs, and better financing opportunities when ordering aircraft.
As you can see, for now Qatar Airways is taking a minority stake in Airlink. One consideration 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 can’t take full ownership of the airline, but rather is just a partner.
What will this investment look like?
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 investment? I guess my first question is what Qatar Airways is gaining 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? Could we maybe even see Airlink join the oneworld alliance?
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.
Bottom line
Qatar Airways has purchased a 25% stake in Airlink, South Africa’s largest regional airline. Qatar Airways already has a partnership with Airlink, but it seems the goal is to strengthen that even further through an equity investment.
While this deal has been finalized, it remains to be seen what the long term implications will be. 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 will change the carrier’s strategy.
What do you make of Qatar Airways investing in Airlink?
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