FROM MAGAZINE: EU-Africa Air Cargo Fostering strong relations

Based on the region’s air trade and airport statistics, the Africa-Europe market accounts for approximately 2.3 percent of the world’s air cargo tonnage, Europe accounts for nearly 60 percent of African cargo and commands the majority of Africa’s international air trade largely because of its proximity and longstanding historical and investment ties. This trade lane being fairly mature and overtraded, the challenge lies in maintaining yields, Surya Kannoth reports.

"What happens in Africa matters for Europe, and what happens in Europe matters for Africa. Our partnership is an investment in our shared future. It is a partnership of equals in which we support each other, help each other to prosper and make the world a safer, more stable and more sustainable place to live." This is what Jean-Claude Juncker, president of the European Commission had to say about the EU-Africa trade relations at the 5th African Union-European Union Summit EU-Africa in Abidjan, Côte d'Ivoire in November 2017.

When it comes to air cargo, Europe has been Africa’s primary partner. It is one of the oldest routes in African air cargo which started connecting the African countries with their respective colonial powers. Based on the region’s air trade and airport statistics, the Africa-Europe market accounts for approximately 2.3 percent of the world’s air cargo tonnage, Europe accounts for nearly 60 percent of African cargo and commands the majority of Africa’s international air trade largely because of its proximity and longstanding historical and investment ties.

This trade lane being fairly mature and overtraded, the challenge lies in maintaining yields. While perishables like flower, fruits, vegetables and leather products are mainly exported from Africa to the European Union, on the import side, high value goods such as pharmaceutical and consumer electronics are seeing good growth.

“Currently, the export items from Africa are temperature controlled cargo like perishables like flower, fruits, vegetables and leather products to some extent. On the import side from Europe the main project are cargo for government and other projects like oil exploration, hydro-electric power and other infrastructural developments. There is also significant amount of pharmaceutical and consumer electronics, which has a trend of shifting to Asia as source of import. We expect high end garment products to have a good potential in the years ahead,” observes Fitsum Abady, VP-Cargo, Ethiopian Cargo.

Ethiopian Cargo & Logistics Services as the leading carrier in Africa has also increased its freighter capacity and frequency along times, in its unwavering commitment across the years to advance the continent’s economic interest in global markets. The flower and other perishables export for Europe market is critically enabled by the air connectivity provided but their volume is not stable with multitude of factors like weather and other economic and political factors. On the other side there is increase in south bound demand after the market improvement in fuel prices as Africa’s import are majorly dominated by oil drilling/exporting nations. Currently, the cargo carrier serves five Europe destinations including the recently added Milan in Italy and Zaragoza in Spain.

“We will continue as we have done recently, increasing destinations as well as frequency in Europe based on the market demand and strategic objectives we have. We have recently opened Milan, Istanbul and Zaragoza; we have also increased frequency to Belgium,” said Abady.

While there has been some turbulence in the cargo volumes along this trade lane over the last couple of years, the prospects for a rebound in South Africa in 2018 are very high with the announcement of a new presidential candidate in 2019, which will result in improved demand, believes Sanjeev Gadhia, CEO, Astral Aviation.

“In 2017, there was an in-consistent volume of cargo from EU to West and Southern Africa, due to the weak Nigerian and South African Economy which were caused by a combination of factors notably weak currency, economic uncertainty, depressed oil and gas sector imports which resulted in a slump in imports which was noticed in the first-half of the year. In the second-half of the year, the demand picked up especially in West Africa due to the increase in demand for consumer goods and the reduction of main-deck capacity especially from China and UAE to Lagos which resulted in improved yields,” he said.

According to Boeing’s forecast, Africa’s air trade with Europe is expected to grow 3.8 per cent per year through to 2035. Boeing forecasts that African airlines will acquire about 100 freighters up to 2035, mostly standard-body (up to 45 tonnes capacity), to tap fast-growing intra-regional markets.
“European economic recovery, African economic diversification into manufactured products, and resumption of moderate growth in African perishables are assumed in the baseline forecast for this air trade flow. A higher level of growth is forecast for the Europe to Africa market, reflecting the higher economic growth rates expected for Africa. At 4.2 percent, the base growth rate forecast reflects both African consumer buying power for goods that arrive by air and increased investment in industries that depend on air cargo for timecritical shipments. As the manufacturing base in Africa continues to develop, the diversity of inbound air cargo should increase and reduce its vulnerability to swings in commodity prices,” the Boeing World Air Cargo Forecast states.

Important markets and investments
For the European Union, Belgium is an important destination for several connections from Africa. In particular, Brussels Airlines, known as an African specialist in the passenger market as well as freight market, has developed an African hub at Brussels Airport. Brussels Airlines Cargo has developed, for example, a successful ‘Fresh to shelve’ service. This service allows African farmers and breeders of agricultural products to send their fruits and vegetables to Europe only a few hours after the harvest. This allows products to be in the supermarkets within 24 hours after harvesting. Also for pharmaceutical shipments, which are very sensitive to temperature changes, Brussels Airlines Cargo has invested in solutions that can guarantee optimal temperature control during transport.

The airline operates a fleet of six Airbus A330s daily to Africa offering an average capacity per flight of 10 tonnes to Africa and 12 tonnes out. It serves 17 sub-Saharan Africa routes in 77 weekly frequencies. The airline estimates the year 2017 to end with 15,000 tonnes to Africa, an increase of nearly 25 per cent year-on-year (YoY). The strongest lanes for the carrier are Cameroon, Democratic Republic of Congo, Ivory Coast, Senegal and Uganda – destinations served daily, or six times a week.

There is increase in volumes but the increase in capacity has over passed that of the volume, hence affecting the load factor adversely. But we are optimistic that we are developing the market further so that more and more volumes of export shall be entertained. The increased load factors will also be expected in 2018.

In a recent development, Air Atlanta Icelandic signed a long-term ACMI deal to place a 747-400 freighter with Network Airline Management (NAM) and Nairobi-based Astral Aviation. The added capacity will help NAM expand its perishables capacity for exports of flowers and vegetables from Nairobi to the United Kingdom. On November 7, 2017, the freighter made its inaugural flight from London’s Stansted Airport to Nairobi’s Jomo Kenyatta International Airport. NAM said it expects to handle 33,000 tonnes per year of perishables exports from East Africa to Europe. In addition, the nose-loading capabilities of the freighter will offer options for shipments of outsized oil, gas and mining equipment for West and East Africa.

“Astral currently operates 2 B747-400F from its Liege Hub to West and East Africa with its partner, Network Airline Management, who also operate an additional 3 x MD-11F on the same route. There will be a likelihood that as demand increases, there will be additional routes which will be planned in 2018,” said Gadhia.

While most foreign carriers are reducing their capacity to Africa, Astral Aviation remains ‘cautiously optimistic’ of positive growth in perishable exports to Europe and a strong south-bound demand from Europe to West and East Africa, fuelled by the growth in consumer demand for e-commerce and oil and gas equipment due to the improved fuel-prices.

Meanwhile, Cargolux added two new destinations to its Africa network in 2017 in an effort to capitalise on demand for mining equipment and high-tech consumer goods. The Luxembourg-based airline added a new call to Douala in Cameroon on October 3 and Lubumbashi in the Democratic Republic of Congo (DRC) on September 15. These two new destinations are added to Cargolux’s existing 33 destinations on the African continent.

Cargolux sees promising potential for growth in the region. With its own road feeder services, the company is also able to offer fast and efficient connections to Yaoundé, Cameroon’s capital and second-largest city. Import commodities for Cargolux include hi-tech goods, agricultural products and machinery, while export shipments are mainly perishables; fruit and vegetables for European consumers.

The carrier delivers range of diverse shipments, from perishables, fruit and flowers to heavy machinery for the oil and gas industry on the continent.

“Africa has always been and will always be an important market for Cargolux and we are happy to be able to support the continent’s trade lanes to Europe, the United States and Asia as well as across the Cargolux network worldwide,” said Jonathan Clark, regional director Africa, Cargolux in a press statement.

One positive spot for the African market has been the growth of e-commerce. Consequently, as Africa continues to grow the omni-fulfilment and B2C sectors, opportunities across the continent are very promising.

“South Africa continues to be the hub for the region, and on most routes, it is more cost-effective to send shipments via Johannesburg, as we can often get better rates than sending directly to final destination. At Tigers, we always aim to stand out through our services by paying close attention to detail. Over the last eight years, Tigers has progressed to e-commerce, giving us a significant competitive edge for the future,” said Paul Lawrence, managing director, Tigers SA. Tigers actively transports project cargo, including art items, such as large bronze sculptures, and race cars from South Africa to the UK and Germany.

Lawrence expects “good growth” for Tiger Fresh, the perishables division of Tigers. “We recently opened a temperature-controlled wine cooler storage facility in the UK, focusing on the growth of specialised products of the South Africa-EU trade lane, adding value to our customers with our unique value proposition. We obtained licenses to store and distribute wine and spirits in the UK, Germany and the Netherlands. We are excited about the upcoming Tigers eShop plans for the EU, which will allow our customers’ brands to expand in the EU through our platform,” Lawrence added.

Striking the right tone for future trade relations
The future direction of the Africa–EU partnership will largely be shaped by the agreement that will replace the Cotonou Accord, which expires in 2020. Talks are due to start in coming months.

Decision-makers of the African, Caribbean and Pacific Group of States acknowledge that the cornerstone of future ACP-EU trade relations will likely be the reciprocal but asymmetric Economic Partnership Agreements (EPAs), for export growth and diversification.