The national carrier RwandAir is on course to be a subsidiary of Qatar Airways in a deal that once concluded will heighten the intensity of battle of East African skies by elevating RwandAir against Kenya Airways and Ethiopian Airlines.
While RwandAir officials remain tight lipped on details and business implications of this significant transaction with huge national interest, Qatar Airways officers on other hand being the suitors, revealed that the deal is at home stretch.
The strategic takeover of RwandAir by Qatar Airways comes at the back of signing of a high level US$1.3 billion investment partnership between Qatar and Rwanda last year.
Taarifa in its analysis on the Qatar-Rwanda aviation deal had projected a likely take over of RwandAir by Qatar Airways. Our analysis last month titled “understanding the likely impacts of the US$1.3 billion Qatar-Rwanda aviation deal” has since come to pass.
Taarifa had projected that a Rwandan deal of the nature that has been in the works with Qataris for so long will most likely shake the regional aviation sector to the core.
Qatar Airways group CEO Akbar Al Baker confirmed that Qatar Airways is on the final paces of inking a transaction that will see RwandAir shareholders government of Rwanda cede a 49% stake in RwandAir to Qatar Airways.
He said; “We are negotiating for a 49 percent stake in RwandAir.”
— Qatar Airways (@qatarairways) February 5, 2020
Akbar made the comments at the sidelines of Qatar Aviation aeropolitical and regulatory summit in Doha on Wednesday.
Qatar Airways, a state owned operator generating over US$12 billion in revenues annually has over eight major subsidiaries.
RwandAir is now set to be Qatar Airway’s 9th subsidiary that it will be used strategically to fight the giants in East Africa- Kenya Airways (KQ) and Ethiopian Airlines (ET).
Qatar Airways owns over 240 aircraft employing over 43,000 staff operating from its hub in Hamad international airport in Doha linking over 150 international destinations.
On the other hand, RwandAir has a revenue base of US$15 million annually and employs staff of 500, according Owler a global search site.
Owler says that RwandAir’s latest funding round was a debt of US$160 million in July 2015.
The implications of the takeover of RwandAir by Qatar Airways are profound by any measures within the regional aviation sector.
To be precise, the deal by far has very significant implications on Rwanda’s economy in a sense that it will be able to place Kigali International aviation hub at par or above the Nairobian or Addis Ababan hubs at some point.
The Kigali hub currently does 700,000 passengers per year against Nairobi’s 7 million passengers per year and Addis Ababa’s 12 million passengers per year.
However, in a bid to upstage its regional competitors, Rwanda through its deal with Qatar is seeking to up its game by constructing a new airport at Bugesera with capacity to handle 14 million passengers per year by the year 2032.
Formations are now set for intense battle for regional air space in East Africa
The finalization of takeover of RwandAir by Qatar Airways will no doubt draw battle lines for the fight for market share for East African skies that will be fought fiercely between three major flag carries namely Ethiopian Airlines (ET), Kenya Airways (KQ) and RwandAir.
Battles will likely be fought through formation of strategic partnerships leading to further consolidation by the three main competitors working in a liberalized environment.
The hub and spoke model is what the three flag carriers in East Africa will use to fight in the market.
“This business model is based on how an operator does business through mergers and or acquisitions to bring in cash and capacity, maintenance programs, route code shares, use of lounges and coordination of frequent flyer programs”, says Michael Otieno an aviation expert.
Otieno adds that: “The model is executed in such a way that the carriers are realigning their businesses through strategic partnerships with investors on one hand and with their home airports on the other hand”.
This is what is informing the deal between RwandAir and Qatar Airways.