Fuelled by years of growth, air freight operators are investing in handling facilities on the continent to improve quality standards. But an influx of lift is threatening to undermine yields, reports Ian Putzger
Africa has been a major focus in recent years for cargo handler Swissport, and having focused largely on upgrading its existing facilities on the continent recently, the global airport services group is set to expand its cargo presence in north Africa in the coming months.
Mark Skinner, senior vice-president for Middle East and Africa, says the company plans to step up its presence and is looking at opportunities in several African countries, hoping to set up in a new market on the continent in 2020. The multinational handler already has cargo stations in Accra, Algiers, Cape Town, Dar es Salaam, Durban, Johannesburg, Kilimanjaro, Nairobi and Port Elizabeth.
While east Africa also remains a focus area for Swissport, north Africa is a major target for growth. In addition to plans to enter a new market in the region, Skinner says the handler is looking to expand its activities to the cargo sector in Morocco – where it was recently awarded a licence for ground handling services at 15 airports by Moroccan airport operator ONDA.
In the way business is conducted – for example, the role of low-cost carriers (LCCs) and traffic flows – north Africa is increasingly resembling the European market, Skinner adds.
Ghana has been another bright spot, generating mostly perishables but also oil and gas traffic. This has prompted Air France KLM Martinair (AF-KL-MP) Cargo to shift a freighter stop from Abidjan to Accra.
Swissport entered Ghana a few years ago and is still gaining new customers there, Skinner says. Alongside Kenya and Tanzania, it has generated good growth for the handler.
Manuel Weill, vice-president for Africa, Caribbean and Indian Ocean at AF-KL-MP Cargo, also highlights a number of markets in Africa have shown good growth. “The biggest drivers have been Kenya, South Africa, Ghana and Nigeria,” he says.
Cairo has also been a strong market with a broad array of traffic, from live animals and machinery parts to perishables and pharmaceuticals. Competition there has intensified, both in the main-deck and the belly capacity arenas. Air France, which has A350 aircraft due to join its fleet, intends to deploy one of them in the Egyptian market starting this winter.
AF-KL-MP added Lusaka – the capital and largest city of copper-rich Zambia – to its freighter network in early September. Served once a week with a 747 freighter in conjunction with Nairobi, this is primarily an import market for the airline, chiefly for mining equipment. Northbound flights fill up with perishables out of Kenya, says Weill.
The Zambian capital is the thirteenth African destination in the airline’s freighter schedule. Overall it serves 40 stations on the continent with 274 weekly frequencies.
And responding to demand from the oil and gas sector, AF-KL-MP has stepped up its presence in Nigeria and is now contemplating the possible addition of a second frequency to Port Harcourt. “We expect more with the oil and gas business,” remarks Weill, adding that he sees signs of recovery of this sector in Angola. He is also looking at Gabon.
For Nairobi-headquartered cargo airline Astral Aviation, 2019 has been another good year, with growth both in the scheduled and charter segments, reports CEO Sanjeev Gadhia. In the 12 months to August, the airline has carried a record-setting 54,000 tonnes.
Indeed, while airlines in all other regions have suffered declines in cargo traffic this year, African carriers have been the only ones to report consistent growth this year. For example, in June Africa was the strongest performer for four months in a row, according to IATA.
“The African market has so far not shown any drop; there are still some impressive year-on-year growth rates,” says Skinner.
Astral has opened scheduled routes this year to Goma, Lusaka, and Lubumbashi and stepped up frequency on existing routes. It also secured new contracts to move perishables for peacekeeping troops into and around Somalia.
Meanwhile, Ethiopian Airlines – the ‘poster child’ of African carrier growth in recent years – has also continued its rapid expansion. In July, it launched weekly B777-200 freighter flights to Chongqing – which allows for connections between the Chinese city and the Americas over its Addis Ababa hub – and the following month saw the start of all-cargo flights to Bangkok and Hanoi.
The airline continues to beef up its passenger fleet: by the beginning of 2020, it stands to have 144 planes serving 123 routes. Its freighter network currently covers 57 international destinations.
While e-commerce has been a significant source of air freight growth in other parts of the world in the last couple of years, its growth has been limited in Africa to the country’s more-developed markets. Astral has registered an increase in e-commerce traffic, primarily going into west and South Africa, Gadhia reports. And e-commerce logistics specialist Tigers opened a dedicated e-commerce centre in Johannesburg in August, citing robust growth in this segment.
But elsewhere on the continent, operators have not seen much activity in e-commerce. “Africa is not yet as dynamic (in e-commerce) as other markets we see,” remarks Skinner.
Weill agrees, noting: “We’re not seeing much development in Africa. Southbound, people buy via Amazon.”
Nevertheless, any increase in traffic into South Africa is welcome news for carriers, who are suffering from a drastic decline in automotive flows from Europe to Africa’s largest economy. Although 2018 produced strong flows to South Africa, mainly automotive cargo from Germany, this traffic virtually collapsed this year, says Weill. The steep drop in southbound traffic also impacts northbound flows, as the country is a major auto producer.
“Adding the political and social challenges South Africa is facing, we do have a big uncertain future (in that market),” Weill remarks.
And manufacturing is not developing as strongly in Africa as might be expected. The much-publicised exodus of production from China – particularly at the lower end – has prompted speculation that Africa would see an influx of producers looking to take advantage of its low labour costs. However, air cargo executives see little evidence of such a trend.
“We see no signs of an influx from China in manufacturing,” says Skinner, although he adds: “There is investment in infrastructure.” He expects one or two Chinese airlines to mount flights to Kenya.
Nevertheless, the prospects for manufacturing do not appear to be very bright at the moment. Weill observes that the textile industry in Kenya and Tanzania – producing mostly jeans for the US market – seems to be under pressure from rising costs. Sri Lanka appears to be more successful in attracting investors, he adds.
Perishables still dominate
Meanwhile, perishables continue to dominate airborne exports from the continent. This year they have accounted for 77% of exports, slightly up from their share in 2018, according to Weill. “The rest is general cargo and express,” he adds.
Gadhia observes: “Perishables from east Africa to Europe have maintained their single-digit growth.”
And the pool of perishables exporters is growing, Weill observes, adding: “We have seen investments into fruits and berries development in Zimbabwe and South Africa. Both seem to have found a window in the global market.”
On the southbound sectors, general cargo makes up the lion’s share of air freight flows with 63% of the total, followed by express with 10%. Perishables account for 8% of southbound traffic and pharmaceuticals for 7%.
“Pharma is something we want to focus on,” says Weill.
Indeed, AF-KL-MP’s joint venture partner Kenya Airways is working on a GDP-certified facility in Nairobi. This will facilitate inbound pharma flows beyond the Kenyan capital, he comments.
And Swissport has boosted its capacity to handle medicines in Algeria. It has gone from two cool rooms there to more than ten in five years.
This is part of a broader trend to ramp up cool chain capabilities in Africa. Swissport has made significant investments in Kenya and Ghana to handle perishables and medicines, and it is currently doing so in Tanzania.
“Interest in cool chain has increased dramatically,” says Skinner.
Over the past four and a half years Swissport has upgraded all its facilities in Africa bar the South African set-up. Skinner regards this as the main reason why the company has outgrown the market.
“Our warehouse in Ghana is probably our most state-of-the-art globally,” he highlights. “We also operate a complete new warehouse in Algiers which is state-of-the-art.”
Swissport Ghana began offering cargo warehousing and ramp handling at a new cargo warehouse that was completed in late 2015 at Kotoka International Airport in Accra, to address air cargo handling infrastructure, capacity and operational challenges at the airport. Swissport Ghana is a joint venture company between Swissport International and Ghana Airport Cargo Centre (GACC) – itself a joint venture between Air Ghana and the Ghana Airports Company, the official operator of all airports and aerodromes in Ghana – and was established in 2014 in order to assist with the planning of the cargo warehouse and prepare for the start of operations at the 10,000sqm warehousing space, designed to handle all kinds of cargo including perishables, valuables and dangerous goods.
The company is responsible for the management, development, maintenance and continued improvement of the warehouse facility, offering import, export and transit air cargo handling services within a modern cargo terminal fully equipped to meet international standards and cargo security directives. Swissport also provides ramp handling services to all cargo aircraft operating into Accra – the main airport for one of the fastest-growing countries in the world.
Weill is looking forward to a new cargo facility in Niger that is due to open shortly. The project is not designed to increase space but to modernise the set-up, with new x-ray equipment and a clear separation of import and export flows.
While air freight infrastructure is markedly improved in a growing number of places, in some locations it is a problem. The airport infrastructure in Angola and Zimbabwe could prevent the development of some business, remarks Weill.
Few countries have made good progress with digitisation of the business. Skinner points to Morocco, which has digitised the tender process. Likewise, countries like Ghana and Tanzania have introduced electronic tools to facilitate clearance processes. However, in other markets customs still insist on paper documents.
Gadhia is looking forward to liberalisation on another front. “The much-awaited African open skies initiative, SAATM (Single African Transport Market) will enter into its next phase of implementation, which will bring greater opportunities for African carriers to operate without any restrictions within Africa,” he remarks.
He is also hoping for progress on the African Continental Free Trade Area project to boost trade within the continent.
As with international expansion, Ethiopian Airlines is looking to blaze a trail in regional traffic. In March the carrier took delivery of its first 737-800 freighter. According to Fitsum Abadi, managing director of Ethiopian Cargo & Logistics Services, this should eventually grow to a fleet of four 737-800Fs to ply regional routes, supplementing the carrier’s belly capacity. In addition, Ethiopian is building up regional strength through alliances and joint ventures with other African carriers. It helped resurrect Chad’s national airline last year and is looking to team up with carriers in Zambia and Ghana.
The stellar rise of Ethiopian Airlines has prompted some African governments to try to emulate its growth with a resurgent national airline. Uganda has formed a new national carrier and Tanzania is reviving its flag carrier.
Some of the lessons taken from Ethiopian’s ascent are not universally acclaimed. In Tanzania the effort to build a strong national carrier appears to have led to a shift in the market from a relatively liberal to a more regulated environment, according to one observer.
But growth may be more difficult to attain now than when Ethiopian was spreading its wings. The weakening global market has caused some international airlines to shift some of their focus to Africa, which bucked the downward trend in the first half of this year. International airlines have pushed into the market, with predictable consequences.
“Clearly there is excess capacity to and from Africa, with foreign carriers increasing their market share, while the yields have been significantly lower compared to previous years,” comments Gadhia.
Operating economics have become a lot tougher. Weill notes that flower rates have been under strong pressure as growers are struggling with high costs.
“This pressure has affected the airlines as such where northbound prices are suffering together with high pressure on southbound ones due to the global economic slowdown. Freighter operations in this part of the world have become unprofitable, and in the mid to long term, expectations will be of reduced capacity,” he reflects.
“On the short term, there will be overcapacity due to airlines looking for alternatives to other depressed markets and moving their capacity to Africa,” he predicts.