African airfreight on the ascent
As it emerges from the pandemic, Africa’s airfreight and logistics market is in expansion mode, attracting significant investment, writes Roger Hailey.
There is investment in new and converted freighter aircraft, upscale cargo drones, consolidation in the cargo ground handling sector and the acquisition of a large specialist freight forwarder by a shipping line.
Kenya based cargo airline Astral Aviation is expanding its 14-strong freighter fleet, with three Boeing B757-200Fs and two Airbus A320 P2Fs.
Astral founder and chief executive Sanjeev Gadhia says: “The B757-200F’s will be operational from June 2022 onwards, as we have had some unfortunate delays, partly caused by Boeing’s lack of timely support on the multi-mode receiver (MMR) upgrade.
“The B757-200F’s will operate scheduled flights from Astral’s Nairobi hub to Johannesburg, in addition to Dubai and Tel Aviv, with plans to operate charter flights to and from China by Q3.
“The A320F will be operational from mid-July 2022 and will operate on charter basis in 2022 on routes between Africa, Middle East and South Asia. The second A320F will be delivered by the end of the year.”
Ethiopian Airways, Africa’s largest airline, has booked an order for five current production line B777 freighters and has an MoU for a further five of the next generation B777-8 freighters. All of this on top of the nine B777Fs it now operates.
Astral is looking to the future freighter additions, primarily from the Airbus stable.
Ghadia says: “In addition to the two A320Fs which have been acquired from Vaayu, which are the first converted A320Fs in the world, we have also signed a Letter of Intent (LoI) to acquire two A321Fs by 2023 and four A330-300Fs (delivery between 2024-5) while we are negotiating to acquire two A330-200Fs (2023-4) and four B777-300ERFs (2024-5).
“We are very impressed with the Airbus freighter products and the support that has been given from Airbus, EFW and ST Engineering in inducting the A320F, hence we remain confident in acquiring more Airbus freighters.”
Ghadia added that while he remains confident in the African market, the plan is to continue to position Astral as a global airline, because some of the freighters will operate “beyond the skies of Africa,” to regions such as China, South Korea, India, the UAE and Europe.
GSA Aero Cargo France – part of the ECS group – represents Air Senegal, DHL Aviation, Royal Air Maroc and Corsair.
Managing director France Jean Ceccaldi says that Air Senegal plans to increase frequencies by nearly 60%, with widebody aircraft on its intra-African network.
Meanwhile, Corsair has added a new route to Bamako in the Ivory Coast with 41 flights for the summer season.
“The first French market in Africa is the Ivory Coast, followed by Senegal and Morocco, then Mali and Burkina Faso,” says Ceccaldi.
“Exports are mainly perishable products thanks to the strength of the Rungis market in France and the large presence of wholesalers in Africa.
“The mail market is the second most important one, followed by general cargo. We can also mention the hatching eggs and one-day old chicks markets. We are also gradually seeing growth in B2B.”
Franck Tordjman, managing director France, Globe Air Cargo, says that one of its clients, Magma Aviation, is planning to add two new B777 freighters at the end of 2024.
“For Magma Aviation, the main market from France is DLA/NSI with strong export of pharma medicines, oil & gas, industrials and some consolidations,” says Tordjman.
The company also represents Niger Air Cargo, which is owned by parent ECS, where it mainly exports cargo for the armies of France, Germany, and the US, as well as some mail, perishable food, pharma and aircraft parts.
Forwarders and handlers in transition
Africa’s freight forwarding sector is in transition, with France’s Bolloré Group agreeing to sell 100% of long established Bolloré Africa Logistics to MSC Group, the European container shipping company, for around €5.7bn.
MSC top management has said that it will look for synergies and avoid duplication of investment, while specifics on airfreight are awaited.
Cargo ground handling in Africa has seen National Aviation Services (NAS) expand its footprint through alliances and acquisitions.
It is also in the process of finalising a £571m takeover of the UK Menzies Group, which has cargo handling operations centred in South Africa.
Burak Kurt, group chief operating officer – cargo at NAS, says: “We have been expanding our operations strategically and increasing our network in the African continent since the start of the pandemic. Pre-Covid, NAS had eight cargo warehouses in the African continent.
“Over the past 18 months, we have expanded this network by two stations, and we now have warehouses in 10 airports. In addition to warehousing, NAS handles cargo as part of its ground handling operations in 21 airports. Twelve of these were added in the past 18 months.
“In the African continent, our cargo tonnages were impacted by Covid and there was a slump. However, we have seen them on the rebound in 2021 and 2022 is going well.”
Kurt adds: “Although the global air cargo market’s demand was down by 5.2% in March 2022 compared to the same period in the previous year, Africa’s CTK was raised by 3.1%, as per IATA’s market analysis report of March.
“The region has a huge potential (especially in South Africa) and is one of the fastest growing in the world. Considering the growth trend in the African airfreight market we are optimistic for the tonnages in 2022.”
Asked about the current airfreight market in Africa, both Astral and NAS remain optimistic despite the potential effect of external factors, such as the rising cost of aviation fuel, provoked by the Ukraine conflict.
Ghadia says: “The perishables exports from East Africa to Europe and Middle East remain positive for growth despite the capacity challenges, while air imports into Africa have started to recover, especially into West and Southern Africa.
“With the fuel prices remaining at record levels, we will see positive growth in oil-producing countries in Africa, in addition to countries such as Mozambique which have a positive outlook.”
He continues: “The perishables high season ended after Mother’s Day, and we expect a reduction in volumes to Europe until September when the market will start to pick as we enter the high season.
“The effect of the high fuel price appears to be a concern as the industry is experiencing high yields for perishables into Europe due to the lack of capacity and high demand during the pandemic, hence fuel surcharges are making the situation worse for the perishable exporters.
“Air imports into Africa remain unaffected in the short-term, but will start to decline in the medium-term, hence the effects of the high fuel price will affect cargo volumes to and from the continent.”
Kurt of NAS says that his airline customers have experienced a “significant impact” due to the high cost of fuel: “Oil prices account for 30-35% of their operational costs. The Russia-Ukraine war, rising inflation and Omicron variant were some key factors recently that kept raising prices.
“Although we see that travel demand is in a recovery trend, I assume that the price of jet fuel will be a threat to overall recovery in the future as well.”
While it is difficult to observe a single trend on a large continent such as Africa, Kurt of NAS says: “It is important to note that though there was a change in commodity types during the pandemic – the market is gradually returning to the pre-Covid status quo.
“The overall trend is that over 95% of the market is consisting of general cargo (including but not limited to electronics, medicines, spare parts) and perishables. However, in certain airports, perishables have a significantly higher contribution, reaching up to 90%.”
It has been a busy 18 months for acquisitions and operational integration by NAS, with the BidAir Services and Siginon Aviation takeovers and the Menzies deal nearing completion.
Kurt says: “In all mergers and acquisition there are certain aspects which are smooth and certain aspects which are less smooth.
“In the cases of BidAir Services, which is now NAS Colossal Aviation Services, and Siginon Aviation, which is now NAS Siginon Aviation Services, we can say that the overall process has been smooth and gone on-track and in-line with our plans.”
He adds that NAS does not want to lose any opportunity in the African market considering its growth potential, and states that creating economies of scale and scope is one of the main benefits of consolidation.
“To me, I believe that this consolidation will be bringing faster strategy implementation across the continent along with bringing together industry experts and talents as well as standardisation of processes and workflows.”
Does Kurt envisage further acquisitions in Africa’s cargo ground handling market?
“Yes, we do. NAS is the fastest growing aviation service provider in emerging markets such as Africa.
“With the vision of becoming the service provider of choice in emerging markets and the mission to aggressively expand in emerging markets, we are keen on exploring all opportunities on the African continent and beyond.”
Some African air cargo hubs have an excellent pedigree in handling freight, Ethiopia’s Addis Ababa and Nairobi in Kenya being two stand out examples.
Ethiopian Airlines has invested heavily in new cargo terminal capacity at its home hub of Addis Ababa and received IATA’s CEIV Pharma in December last year.
Ghadia says that the Nairobi hub has been performing “exceptionally well,” while the Johannesburg hub has had some challenges caused by the jet fuel disruption in May following the floods in Durban.
Kurt of NAS says that there is a variance in the standards of cargo handling across the continent: “We cannot say that the entire region is having poor cargo handling infrastructure, however there is a wide array of airports which have a scope for improvement.
“For this improvement to take place, a focus is required not only on infrastructure but also on training, gaining efficiencies by enhancing processes, improvement of facilities also by investing in technology and digitalisation of certain processes.”
He continues: “These require coordination with external stakeholders such as shippers, consignees, agents and government bodies. We are planning investments in our facilities including but not limited to facilitating a faster processing of perishables in order to improve efficiencies and reduce lead time.”
Drones are another one of the areas of innovation in the African cargo market. German drone delivery pioneer Wingcopter and Continental Drones have a partnership agreement to help establish drone-based delivery networks in Africa with thousands of Wingcopter drones across the continent.
US Autonomous cargo drone developer Natilus has secured an order from Astral for one of its aircraft, continuing the airline’s investment in drone technology for freight delivery across Africa.
Ghadia says: “We have a commitment to acquire one drone with a payload of 3.8 tons, with plans to acquire additional drones once the company enters commercial production.
“We are a market leader in drones and are also focusing on the induction of large cargo drones in our fleet, as the potential to operate large cargo drones in Africa, for mid-mile and last mile delivery is immense.”
He continues: “The future of cargo deliveries by drone in Africa is very promising. Already Zipline has been able to scale their drone deliveries in Africa to new opportunities in the US, hence Africa will always be the region where drones will be tested before they can be scaled in other parts of the world.”
Aero Cargo’s Ceccaldi says that Covid also continues to impact the market.
“One of the challenges encountered was the resumption of marketing following the [Covid] halt, and the management of stop-and-go.
“Another challenge was the management of rates with a significant pressure and increases due to a high demand confronted with a lack of capacity.
“During this period, we supported the companies by setting up some charter flights (P2C and full freighters).”
Alain Boussard, managing director France, Niger Air Cargo, says the main challenge during the Covid crisis was to maintain weekly operations despite administrative and crew issues (vaccination, lockdowns, staff sickness etc…).
“Niger being a landlocked country, the four-month closure of the airport to international flights (except for cargo) put a severe brake on the country’s economy.
“Like other countries in the Sahel band, Niger has weathered Covid rather well thanks to the drastic measures taken in time.
“With passenger flights no longer able to operate, there was clearly a lack of capacity in the country, which resulted in higher rates.
“Only freighters were operated and Niger Air Cargo was the only airline to operate weekly throughout the crisis.
“We had to adapt week after week to the changing restrictions of each country concerned by our flights and we did it – we are proud to have successfully operated all our flights without fail, being the only operator to serve Niger during months.”
Another challenge facing the market at present is high fuel costs.
Tordjman of Globe Air Cargo says for Niger Air Cargo, a fuel surcharge was added which helped provide some stability in the base rate as only the surcharge changes.
He adds: “Regarding Magma Aviation, the fuel is more affecting the import business in Europe, as is it mainly perishable fruits and vegetables that do not support higher rates and it was a headache to maintain reasonable price levels.
“On the export side, we obviously had to increase the rates by implementing a fuel surcharge to compensate and cope with the higher costs.”
Ceccaldi adds that while the African market is traditionally north/south oriented, airlines have turned to Asia which offers a more favourable exchange rate in the face of rising costs.
At the same time, there has been an increase in the supply of Asia-Africa capacity via hubs in eastern Europe and the Middle East.