The land of opportunity – but still barriers to overcome
The African airfreight industry has registered a remarkable growth in the past few years but there's still much work to do. Kaleyesus Bekele reports from the Africa air cargo summit in Addis Ababa.
According to the International Air Transport Association (IATA), African air cargo is projected to grow at a rate of 4.4% in the next five years – the second fastest increase next to the Middle East.
The fast economic growth most African countries are registering, a burgeoning middle class, plus increasing trade ties between Africa and Europe, the Middle East and Asia, are all contributing factors.
Europe and the Middle East and South Asia (MESA) account for 90% of air cargo volumes into and out of Africa. The thriving trade and investment relationships with China is also stimulating strong demand.
Global air cargo industry leaders recently gathered in Addis Ababa, Ethiopia, to participate at the Africa air cargo summit organised by EuroAvia International at the Sheraton Addis. Stakeholders from all over the world deliberated on the opportunities and challenges in the African air cargo industry.
At one panel discussion, Berhanu Kassa, Ethiopian Cargo International sales director, pointed out that directional imbalance was one of the major challenges in cargo flight operations. Kassa said poor infrastructure, prohibitive service charges and destination taxes were impediments in the growth of airfreight.
Kassa said the declining price of oil could bring some benefits to airlines in reducing operational costs. However, he added, the soaring oil price also has a negative repercussion. “Oil exporting countries’ economies have been adversely affected. Major African economies, such as Nigeria and Angola, have low demand for air transport because of the lost revenue.”
According to Kassa, because of currency devaluations, carriers have faced challenges in collecting their sales revenue from some African countries.
Sanjeev Gadhia, CEO of Astral Aviation, listed lack of return cargo, limited connectivity, lack of market liberalisation and cooperation as the impediments in the development of air cargo in Africa.
He also cited the high cost of jet fuel, cargo-handling royalties and taxes as major challenges.
Kenya Airways commercial director, Peter Musola, said that safety and security, a lack of market access, poor air cargo infrastructure, high production costs – notably the cost of fuel, which he said is 21% higher in Africa than the world average, were hiccups in the African cargo industry.
Musola told delegates that complex customs regimes, corruption and poor governance and volatility of currencies were affecting African operators. Nigeria, which has suffered from plunging oil prices, owes foreign carriers some $500 million. He also pointed out that the African market was dealing with low load factors and high capacity, like much of the industry.
IATA regional director for Africa, Sidy Gueye, explained to delegates there has been pressure on yields and revenues due to rising capacity in the marketplace.
In April, available freight tonne kilometres surged by 25.6% year-on-year, but the load factor dropped to 25.7%. Gueye said the African cargo market was affected by trade protectionism and lack of safety and security.
Elijah Chingosho, the African Airlines Association (AFRAA) secretary general, advised carriers to work more on e-freight to grow business performance: “African air cargo carriers need to minimise costs by introducing more paperless processes,” he said.
Africa has a relatively high electronic air waybill (eAWB) penetration at 53.4%, with Ethiopian Airlines leading the way with 92.9%.
Despite all the challenges, there seems to be a promising future for the African air cargo industry. With large arable land, vast natural resources and fast-growing economies, the continent appears to have a bright future.
Gadhia said the intra-Africa market was currently growing by 10-15% per annum and added that Astral anticipated having a good chunk of the growing market.
He said his company would add new Boeing 747 freighters and a B737-400F to its fleet in the near future.
The cargo operator is planning to add new west and southern African hubs to complement its current centre in Nairobi. It hopes to lease two B747s for international operations and to lease six B737s for intra-African use. It currently operates a B747-400F, B727-200F, DC9-34F and Fokker27 m500F.
Gadhia said the South Africa hub would be in Johannesburg, while the west Africa operation would be in either Accra or Lagos. “We believe in a multi-hub strategy.”
There are also plans to increase its network in east Africa from eight to 14 routes, become a full IATA member next year and invest in cargo infrastructure.
There are also plans to become the first airline in Africa to operate cargo drones in order to provide access to remote parts of the continent. “Do not ask me the details now but we are working on a plan to launch drone cargo flight operations in remote parts,” Gadhia told the delegates.
Ethiopian Airlines also revealed its ambitious growth plan during the course of the meeting. With six dedicated B777Fs and 350,000 tonnes of annual uplift capacity, Ethiopian is the largest African cargo operator.
Group CEO, Tewolde Gebremariam, said Ethiopian is building a new $119 million cargo terminal with the capacity of handling 1.2 million tonnes of freight per annum. About 60% of the construction work on the first phase of the new terminal is completed and work on the phase is expected to be completed next year.
“When completed it will be Africa’s largest cargo terminal and will be comparable with the world’s biggest cargo terminals in Amsterdam Schiphol Airport and Changi Airport in Singapore,” Gebremariam said.
He believes that the new state-of-the-art terminal, coupled with the modern Boeing B777 cargo fleet, will enable Ethiopian to make Addis Ababa Africa’s cargo hub.
Gebremariam said Ethiopian Cargo was the second biggest business unit in the Ethiopian Aviation Group. It has eight dedicated freighter aircraft (six B777s and two B757s) and 24 route networks.
The existing cargo terminal at its main hub in Addis Ababa Bole International Airport has the capacity to handle 250,000 tonnes of cargo. It has a modern perishable cargo (cold room facility), which can accommodate 65,000 tonnes. Ethiopian Cargo has its European hub at Liege Airport in Brussels and its second cargo hub in Africa in Togo Lome.
Ethiopian transports various cargoes from different parts of the world with its B777 fleet and distributes it to sub-Saharan African countries with its B757 freighters. It generates 425 million dollars revenue every year, about 15% of the total income of the aviation group.
The CEO said that by 2025 Ethiopian Cargo would generate two billion dollars and boost its cargo fleet to 18 from the existing eight, its annual hauling capacity to 820,000 tonnes and its cargo route network to 37 from 24.