Politics could scuttle Emirates tie-up with South Africa Airways

News reports in South Africa said a 2 billion rand deal to save South African Airways from possible bankruptcy fell through.

The relationship between Emirates and South African authorities has not always been smooth sailing. Toby Melville / Reuters

The political climate in South Africa has hindered a deal between its loss-making national carrier and Emirates that could create a partnership similar to the successful tie-up that the Dubai-based airline has with Australia’s Qantas, aviation analysts said.

Earlier this week, news reports in South Africa said a 2 billion rand (Dh607.6 million) deal to save South African Airways (SAA) from possible bankruptcy fell through after a meeting between the two airlines in Paris.

The financially ailing SAA underwent a 90-day action plan this year to turn its operations around after the South African government bailed out the airline twice and injected 10bn rand in the process. The SAA chief executive Nico Bezuidenhout has set a target to increase revenue from Africa by 30 per cent in the next 12 to 18 months.

SAA said that talks with Emirates management to deepen the airlines’ relationship are still ongoing, but circumstances have not allowed them to reach a final agreement yet.

“While the conversation is ongoing between management of SAA and Emirates within the context of the existing relationship, and the scope of the conversation between the two carriers is well within positive territory, circumstance has thus far not allowed for finality,” said Tlali Tlali, a SAA spokesman.

Emirates said it was exploring the enhancement of its code-share partnership with SAA, which would lead to new opportunities for the two airlines.

The relationship between Emirates and South African authorities has not always been smooth sailing.

In November, the government threatened Emirates with legal action over its efforts to launch a fourth daily flight into the country.

If a deal is ultimately agreed on, analysts said SAA could be the new Qantas for Emirates in another lucrative market. Emirates arranged a tie-up with Qantas in 2013 on revenue sharing and corporate cooperation in areas such as schedules, marketing, pricing and their frequent flyer programmes. The deal did not include any kind of equity investment amid limits on foreign ownership of the Australian carrier. As part of the deal, Qantas agreed to switch its regional hub to Dubai from Singapore.

The deal gives Emirates access to almost all airports in Australia, while Qantas can connect through Emirates to about 65 cities in Europe, the Middle East and North Africa. In February of last year, Australasia was the fastest-growing market for passenger traffic at Dubai International, increasing by 30.5 per cent year-on-year on the tie-up.

Will Horton, a senior analyst at the Centre for Aviation, said interest from GCC carriers in South Africa mirrored previous efforts to increase capacity to the Australian market.

“South Africa is an end-of-the-line market and SAA has struggled with long-haul flying,” he said. “A Middle East partnership brings more opportunities and turns a competitor into your partner. Emirates is the second-largest international carrier in South Africa after SAA. Emirates is bigger than Air France, KLM and Lufthansa combined.”

However, a partnership decision is not left entirely to the airline, said Mr Horton.

“South Africa’s always-political overtones in anything aviation continue to divert logic and sound policy,” he said.

Although a strategic partnership between Emirates and SAA does not necessary need capital involvement, Mr Horton said, “an equity stake elevates the partnership and could be a card to play at the board level if the government is blocking strategic developments.”

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