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New Alliance threatens regional giant.

The recent launching by Tanzania, Uganda and South Africa of a new joint international airline, 'The Alliance', has sent shockwaves through Kenya Airways, which has hitherto occupied a dominant position in the region.

According to analysts, Alliance will change the course of commercial aviation in East Africa, forcing Kenya Airways to change both its operations and its policies in order to withstand the new competition.

Alliance will begin operating its prestigious Boeing 747-SP aircraft this month and will initially serve the Johannesburg/London/Dubai/Bombay routes, with stopovers in Dar es Salaam and Kampala. The airline plans to add Rome to its network later.

A $100m venture, Alliance is a first step toward the integration of African airlines under the eight-member African Joint Air Service project (AJAS) mooted in Arusha, Tanzania, in early 1987. Under the establishment pact signed in Dar es Salaam in December last year, South African Airways (SAA) holds a 40% share in Alliance, with Air Tanzania and Uganda Airlines each holding 10%. In addition, the Tanzanian and Ugandan Governments between them hold 5%. The remaining 35% of the shares are to be subscribed to private investors from Uganda and Tanzania, though the shares will initially be held in trust by the privatisation units of the two Governments.

The Directors of Alliance include Mr Christo Roodt as Managing Director (South Africa), Mr Joseph Mungai (Tanzania), and Mr Adrian Sibo (the Ugandan Chairman of AJAS). The new airline will have its headquarters in Kampala.

For Air Tanzania and Uganda Airlines, the majority of whose flights are domestic, the new venture will provide experience of operating international routes and thus considerably enhance their capabilities.

By linking up with SAA, one of Africa's most efficient and profitable airlines, the two will gain enormously from the South African flag carrier's superior technology and sophisticated cabin crew and pilot training programmes, among the most advanced in the world. Offices in Kampala and Dar es Salaam are to be equipped with the latest computer reservations, financial control and accounting systems. Indeed a knock on effect of these and other investments by the new airline is an expected acceleration of the development of tourism in the two East African states and beyond.

But although it has enormous potential, the Alliance airline will need more than the technology, expertise and massive resources put at is disposal by SAA. Observers argue that the airline's success will depend largely on how the three partners treat each other. Past experience in the region, more specifically that of the defunct East African Airways, shows that such a partnership is fraught with dangers if one partner dominates, or is at least perceived to dominate, the others.

The issue of mistrust was in fact the main cause of the collapse of East African Airways, which during its heyday was rated as highly as other international airlines then in operation. But while both Tanzania and Uganda appear to be ready to operate within a partnership dominated by South Africa, Alliance is already seen as posing a direct threat to the Air Tanzania Corporation (ATC), underlined by the reluctance of Tanzanian Government aviation officials to comment on the new project. Sources in the Ministry of Transport and Communication in Dar es Salaam have confirmed that AJAS has already met considerable resistance in Tanzania and from other participating officials. Whether this causes problems for the new Alliance relationship remains to be seen.

For Kenya Airways on the other hand, the challenge posed by Alliance is more immediately real not least because its routes mirror those operated by the new airline. It seems, for instance, that the national flag carrier will lose business on the Nairobi/Dar es Salaam and Nairobi/Kampala routes. It might also lose considerable business on the lucrative Nairobi/Johannesburg route.
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Title Annotation:Tanzanian, Ugandan and South African joint international airline 'The Alliance'
Publication:African Business
Date:Mar 1, 1995
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