How will Africa increase air cargo market share as recovery gears up?
Current aviation market trends and data points suggest that aviation is slowly and steadily getting back to what it was pre-pandemic. Going forward, how will Africa’s air cargo industry deal with the headwinds and tailwinds it is experiencing?
The air cargo industry in Africa benefited from the strong demand for vaccines and other medical and humanitarian supplies needed to combat the Covid-19 pandemic which ravaged the aviation industry from early 2020.
To enhance their capacity to meet the unusual demand, Africa's cargo airlines, namely Kenya Airways, Ethiopian Airlines, Astral Aviation as well as Allied Air and Egypt Air acquired converted cargo aircraft.
One of the significant benefits of the Covid-19 to Africa was the opportunity for some African airlines to develop internal capacity for passenger-to-cargo aircraft conversion. Kenya Airways' aeronautical development engineer Hazel Wachira led her colleagues to convert the airline's Boeing 787 Dreamliner to cargo aircraft. Also, Ethiopian said its MRO "temporarily changed 25 of its passenger planes to freighters." In fact, an elated Airbus said, "Not surprisingly, Ethiopian used its entire A350-900 fleet for cargo operations." Ethiopian took a step further to establish a passenger-to-freighter conversion centre in Addis Ababa in conjunction with Israel Aerospace Industries (IAI), to "address the growing demand for B767 cargo planes."
Other regional airlines like Overland Airways in West Africa responded positively to the demand for the special flights. Roger Foster, CEO of Airlink, in South Africa, said his airline made use of belly hold to move cargo during the period.
Willie Walsh, the Director General of the International Air Transport Association (IATA), said "Air cargo stood out as a lifeline for vaccines, supply chains, and airline revenues throughout the Covid-19 crisis. And it has grown to be an even more vital contributor to revenues."
Besides, the Covid-19 compelled provision of specialized cargo facilities among various African airports, especially to handle vaccines, even though the huge pre-Covid-19 gap in cargo facilities stood out.
Interestingly, however, mid-year 2022, Africa's cargo demand is slowing. IATA reported that "African airlines saw cargo volumes decrease by 6.3% in April 2022 compared to April 2021." Capacity was 1.5% below April 2021 levels, it explained.
Overall, the global and African aviation industry is more excited that the Covid-19 restrictions are being removed. About 27 African States have eased travel restrictions; and many of the grounded passenger aircraft are returning to the skies, bringing back their belly-holds to boost cargo capacity.
In May 2022, The African Airlines Association (AFRAA) estimated that "African airlines' capacity deployed reached 76.6% of 2019 capacity," adding that "traffic recovery is now at 66.3% of 2019 pre-Covid level," while Kamil Alawadhi, Regional Vice President of Middle East and Africa for IATA, said air cargo has risen 9% above pre-Covid-19 level in Africa.
However, the new opportunity to return to the skies brings African airlines back to face the endemic pre-Covid-19 challenges in the continent's operating environment. It is worrisome that IATA's April 2022 industry data showed that Africa still contributes a meager 1.9% of global air cargo traffic, hardly different from the pre-Covid-19 level. This raises the serious question of how Africa will build back and increase its global cargo market share. Going forward, it becomes more interesting to see what Africa's air cargo industry would make of the headwinds and tailwinds it is experiencing.
Weak operationalisation of SAATM & AfCFTA
For meaningful air cargo and aviation growth in Africa, the air transport market must become fully liberalized as envisioned under the Single African Air Transport Market (SAATM) by the African Union Commission (AUC), African States and African Airlines and other stakeholders. Kamil Alawadhi reiterated SAATM's benefits from a recent study on 55 African States which showed $2.7 billion increase in Africa's Gross Domestic Product (GDP), and additional 300,000 jobs across the continent. SAATM will also lead to $1.85 billion increase in trade, with additional 27% in flight frequencies, as well as 26% reduction in fares, and 51% overall traffic growth. SAATM is undoubtedly the lifeline for air cargo in Africa under the current recovery.
Thankfully, the AUC and the African Civil Aviation Commission (AFCAC) recently reported the adoption of the competition rules, a core part of the African Civil Aviation Policy that will guide operation of African airlines under full implementation of the SAATM. More so, the African Continental Free Trade Area (AfCFTA) will stimulate generation of critical mass of cargo to feed African airlines, who will in turn access Africa's vast market of $4 trillion and 1.3 bllion population relying on the SAATM.
African airlines need unfettered access too. Allen Onyema, Chairman of Air Peace, and Roger Foster, CEO of Airlink, both victims of prohibitive charges and fees by various States call for reduced and uniform charges among states. Foster wants regional institutions to pressure states to moderate these charges.
Government taxes pose another headwind for air cargo development in Africa. Octavio Oliveira of Cabo Verde Airlines has lamented new moves by some states to increase taxes, despite efforts by AFRAA to reduce and harmonise taxes and fully implement SAATM. Failure of African governments to build their economies has led them to resort to taxes on aviation in their scramble to raise revenue to fund other sectors of the economy.
Another headwind in Africa is the airlines' blocked funds, which partly result from the mismanagement of Africa's economies and government's inability to generate enough foreign exchange to enable airlines repatriate their funds. For instance, the sustained inability of Nigeria to build refineries for local production of aviation fuel has let to complexities and malpractices that drive up cost of the country's imported fuel. IATA said 12 African states have blocked about $1 billion, out of $1.6 billion airlines funds blocked globally.
The Russia-Ukraine war further complicated the cost of aviation fuel, which is now over 50% of some airlines' operating cost. AFRAA said, "From the mid-May average price of 146.5/bbl, Platts estimates the impact on airlines 2022 fuel bill is $121.1 billion."
IATA's Chief Economist, Marie Owens Thomsen said "Costs are a key industry challenge this year" including fuel, infrastructure, labor and interest rates. It is evident therefore African regulators and operators must focus on cost reduction for aviation to achieve substantial growth in the near-term.
Air cargo infrastructure lagging
Air cargo infrastructure remains another major setback for cargo improvements in Africa. There is strong interest and doubt over Nigeria's current airport concession programme which will see Nigeria's four international airports in Kano, Abuja, Lagos and Port Harcourt managed by private investors. While Egypt is planning a new airport with improved cargo facilities, Kenya Airports Authority (KAA) is developing cargo infrastructure in Mombasa, Malindi and Eldoret. The concession and planned setting up of agro cargo airports in Nigeria's six geopolitical zones give hope of improved cargo development in Nigeria and the region.
In Ghana also, Kotoka International Airport, Accra, generally handles cargo activities. There are expectations for other airports like Tamale, Akosombo and Takoradito be repositioned for cargo, according to a senior airport manager with Ghana Airports Company Limited.
There are current efforts to drive air cargo development in the Southern African landlocked country Eswatini, formerly called Swaziland. The Director General of the Civil Aviation Authority, Andile Mtetwa-Amaeshi, said: "We are in the process of building a cargo community council. In summary it would consist of the various players in logistics and stakeholders within aviation in the country."
The absence of notable cargo airlines in Cameroun tends to slow air cargo performance. "It is mostly by irregular companies. The regular companies are doing it but very little," said an aviation analyst in Cameroun.
However, such under-served markets could benefit from the expected emergence of more robust airlines in the region. For now, Africa's air cargo market is still largely served by foreign carriers.
All forecasts for air cargo in Africa predict a robust future of improvement in cargo infrastructure, fleet, and innovation including e-commerce. Africa's predominantly young population is fast-embracing e-commerce, just as a number of drone operators are positioning in the market. Early June 2022, Zipline launched its drone services to distribute healthcare supplies in Kaduna State in Northern Nigeria. Zipline is also making efforts to penetrate other markets in Africa. And in Kenya, Astral Aviation is driving cargo drone services, while UNICEF has long engaged drone interventions in places like Malawi. Despite the security challenges and regulatory restrictions for drone operation, Africa's air cargo market will experience exponential rise in cargo drone services over the coming 5-10 years.
Hanging on hopes
Aaron Munetsi, President of Airlines Association of Southern Africa (AASA), wants African airlines to upgrade their services to become airlines of choice in Africa. This is vital for air cargo in Africa. As economies and aviation industry recover globally, Africa's air cargo industry now faces the vital test of improving air cargo infrastructure, services and demand. There is strong hope that the AUC, AFCAC, African Airlines and Regional aviation and economic organizations must lead efforts to move Africa up from the present 1.9% of global air cargo market share.