Qatar Airways closes in on South African deal

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Qatar Airways is closing in on a deal to buy a stake in South Africa’s largest regional airline Airlink in the latest stage of the Gulf carrier’s ambitious expansion across the continent. 

The two sides have held detailed talks about an investment from Qatar Airways, which is wholly owned by the Qatari government, although no final deal has yet been reached, according to people familiar with the matter.

The investment would strengthen Qatar Airways’ network in southern Africa, giving the airline access to passengers from regional cities and ultimately funnelling more traffic through its Doha hub. 

Qatar Airways chief executive Badr Mohammed Al Meer told journalists this week that his airline was in the “final, final stages” of completing an investment in a southern African airline, without naming Airlink. 

He said southern Africa was the “missing part of the equation” in the carrier’s network across the region, following a partnership with Royal Air Maroc and planned investment in 49 per cent of central Africa’s RwandAir.

“This airline in the southern part of Africa was important to us to create a network and cover every city in the continent,” he said. 

One person familiar with the talks said that Airlink had been discussing “various opportunities” with the Qataris for some time, including a possible equity investment.

When contacted by the Financial Times, Airlink’s chief executive Rodger Foster said only that: “Airlink is always exploring opportunities and is in conversations with several existing airline partners. However, we have not committed to any binding strategic equity investment.” 

The airline, which has 66 operational aircraft, carries more than 3mn passengers every year to destinations in more than 15 sub-Saharan African countries, including South Africa, Botswana and Tanzania, as well as the remote island of St Helena in the south Atlantic.

The company was established 32 years ago by Foster and Barrie Webb, and launched in 1995, a year after South Africa’s first democratic election at the end of apartheid.

Shareholders include Foster and Webb, investment company Coronation Capital, and the Sishen Iron Ore Community Development Trust, which holds 32.5 per cent on behalf of 350,000 poor families from South Africa’s Northern Cape.

The airline is profitable, and those close to the negotiations said its motivation for any equity deal would be strategic, rather than financial.

A deal would “have to deliver significant benefits in terms of increased traffic, broader and deeper market reach, lower distribution costs and heft when negotiating with suppliers, lessors and insurers”, one person said,

Qatar Airways already flies to some 30 destinations across Africa, a region where demand for air travel is forecast to grow rapidly as economies develop. US plane maker Boeing has estimated that intra-African passenger traffic will more than quadruple over the next 20 years.

“Airlink’s scale as a regional airline is suitable for Qatar, and it is well-run, with a conservative management team which have kept it profitable for a long time,” said Dr Joachim Vermooten, a transport economist at the University of Johannesburg.

Vermooten said Airlink was one of the few South African airlines to emerge from Covid stronger than before, and was able to capture a larger share of the regional market once the national carrier, South African Airways, was placed in business rescue.  

The one sticking point in any deal is South Africa’s air licensing rules, which stipulate that domestic airlines must be 75 per cent controlled by South Africans and cross-border airlines must be “substantially” owned by residents. But Vermooten said these local ownership requirements are slowly being loosened globally to ensure local airlines have the financial firepower to “increase their capital base”