Alliance, the new joint venture airline, could become a shining example of airline co-operation in Africa. If it is to succeed, the two major tests it must pass are to be profitable and to ensure that all its shareholders benefit.

Alliance Air is due to commence operations in March this year following its official launch in Dar-es-Salaam, Tanzania, in December, 1994. However, rather than commencing scheduled international services at once in a low season, Alliance may take advantage of an immediate profit-making opportunity by chartering its single aircraft, a Boeing 747SP leased from South African Airways, back to SAA for use during the 1995 Rugby World Cup being hosted by South Africa.

According to this scenario, the charter contract would enable Alliance to strengthen its financial base from the outset. It could then start scheduled operations after 1 July with some fast-earned money in its coffers. A neat idea, say some.

Ian Bromley, SAA’s Senior Manager for Market Communications, points out that the Rugby World Cup (RWC) is the third largest sporting event in the world after the soccer World Cup and the Summer Olympics, and the event in South Africa is expected to attract a television audience of three billion people in 150 countries.

With unprecedented numbers of people moving around the country to the different RWC venues, SAA will have to cope with a challenge of a unique logistical nature, says Bromley. “We anticipate that on some days we may have to move as many as 30,000 rugby fans (on nearly 80 Boeing 747 flights) as well as our usual heavy load of business travellers and tourists.”

Clearly then, the Rugby World Cup in South Africa presents a golden opportunity for Alliance to get off to a flying start, albeit not in the role originally anticipated. The RWC deal would reflect the carrier’s determination to be strictly commercial, with profitability as its principal goal.

The new international airline is a joint venture between South African Airways, Air Tanzania, Uganda Airlines and the Governments of Tanzania and Uganda. It has its roots in the African Joint Air Services (AJAS) accord signed by Tanzania, Uganda and Zambia in September, 1990. However, Zambia pulled out of AJAS in 1992 for financial reasons. Following the democratic election in South Africa in 1994, SAA quickly stepped into the breach and provided the resources which have enabled the project to become a reality.

The partners in Alliance plan to share traffic rights in a deal that should vastly extend the scope of air routes and broaden the opportunities for further development of air traffic to and from East Africa.  SAA is the largest single shareholder in Alliance with a 40% stake. Air Tanzania and Uganda Airlines each have a 10% shareholding and the two Governments both have a 5% stake. Private investors from the two East African countries may eventually acquire the remaining 30%, but these shares will initially be held in trust by the privatisation units of the two Governments.

The new airline is headed by Managing Director Christo Roodt from SAA and its Board of Directors includes Michael Katz, Dr Anton Moolman and Mike Myburgh from South Africa, Josef Mungai from Tanzania, and Adrian Sibo from Uganda. Air Tanzania and Uganda Airlines will each nominate a further Director to the Board and the Chairman was due to be appointed at the first Board meeting.

The initial scheduled routes to be operated by Alliance will be Dar-es-Salaam, Entebbe, London, Bombay, Dubai and Johannesburg. “Offices have already been rented in Kampala and Dar-es-Salaam equipped with the latest technology,” says SAA. “The worldwide computer reservations system, Galileo, will be installed as well as revenue and financial accounting systems. Office staff will initially be trained in South Africa and technical back-up for operations will be provided.”

Under SAA’s wing, Alliance will operate from the less crowded Terminal One at London’s busy Heathrow International Airport, like SAA. This is rumoured to have upset British Airways, a rival to SAA on routes to Southern Africa and which sees Alliance as yet further competition. BA apparently wanted Alliance to join most other African airlines which operate from Terminal Three.

Speaking at the official signing ceremony in Dar-es-Salaam, which was attended by representatives of all three countries, Stella Sigcau, South Africa’s Minister for Public Enterprises, described the joint venture as a further indication of her country’s commitment to help develop tourism and business in the African region.

“The Alliance routes will bring more nations together and help build the entire continent’s potential as an economic entity,” says Managing Director, Chriso Roodt.

Uganda’s Minister for Works, Transport and Communications, Ali M. Kirunda-Kivejinja, remarked that the launch of Alliance by the three countries was an encouraging step towards the implementation of the Yamoussoukro Declaration of 1998 which urged greater co-operation and integration among the various African airlines.

He praised those who had helped to implement the AJAS/Alliance idea, including George Lewis of Zambia, Dr Gideon Kaunda of Tanzania, the AJAS Chairman, Adrian Sibo of Uganda, and South African Airways’ parent company Transnet Ltd.

SAA’s dominant shareholding in Alliance has attracted differing comments in African airline circles. Some contend that the new airline will provide a springboard for SAA to capture a large share of the African market. Others point out that without SAA’s initial investment and support AJAS would have remained a paper project for many years to come as its original members simply lack the necessary resources to make it a reality on their own.

For its part, SAA has stated frankly that, first and foremost, it regards the joint airline as a purely commercial venture which must be financially viable. In addition, senior officials of SAA say that they are well aware of the need for each partner in the venture to gain tangible benefits from the project. Otherwise discontent could arise, with potentially unpleasant consequences.

The sorry end of East African Airways (EAA), the joint venture international airline which collapsed in the late 1970s after its partners fell out with each other, is still fresh in the memories of aviation officials in Africa. The partners in EAA were Kenya, Tanzania and Uganda.

According to members of Alliance, the door has been left open for other airlines in East and Southern Africa to participate. Several carriers have been mentioned as possible Alliance members, including Kenya Airways, although in the case of the Kenyan carrier this seems somewhat unlikely at present.

Meanwhile, Tanzania’s Minister for Works, Communications and Transport, Nalaila Kiula, has said that the Government is determined to ensure the survival of Air Tanzania. His statement was in response to the concern expressed by the staff of the airline and other Tanzanians that the formation of Alliance would jeopardise the national carrier. In particular, they do not want Alliance to take over Air Tanzania’s regional routes in Africa.

Air Tanzania has experienced grave financial difficulties over the years. However, under its current Managing Director, Melkizedeck E. Sanare, the airline has improved its performance. Indeed, it reported a record profit of US$650,000 in the year ending 30 June, 1994.

Christo Roodt, Managing Director of Alliance, says that passengers’ expectations will not only be met, but exceeded. He adds: “Staff appointments will be on merit only and we believe Alliance will offer the best in African hospitality and service. The strength of Alliance will be in its people, their energy in breaking new ground and their determination to succeed in this venture.”

– By Nick Fadugba

© Copyright 2012 Aviation Business Publications Limited

Alliance Air: A promising airline alliance

January 1995