Perishable Logistics in Africa – a turnaround tale
Even as the Covid-19 pandemic disrupted businesses and global supply chains last year, the perishable logistics industry in Africa continued to stay buoyant.
The Covid-19 pandemic had a severe impact on the perishable exports of Africa in the initial months of the pandemic as air freight capacity disappeared quickly with the suspension of passenger flights connecting key African airports with markets in Europe. Innovations, strategic partnerships and industry-wide collaborations have helped Africa’s perishable export to pick-up rapidly and this revival is supported by a carefully orchestrated return of air cargo capacity.
Even as the Covid-19 pandemic disrupted businesses and global supply chains last year, the perishable logistics industry in Africa continued to stay buoyant despite the challenges thanks to a series of strategic moves made by the local stakeholders, trade bodies and several of the African airlines to keep afloat.
Many of the African airlines decided to convert their passenger aircraft to operate them as cargo only passenger flights. This innovation allowed carrier to offer capacity on passenger cabins in the upper deck. These aircraft, operated as mini freighters or called preighters, allowed cargo to be loaded on to the seats and over-head bins. Besides some of the aircraft had their seats removed allowing more cargo to be loaded in the passenger cabin floor. This helped many perishable export businesses, which faced massive losses in most part of 2020, to get back on their feet and cut losses.
According to the International Air Transport Association’s (IATA) latest World Air Transport Statistics report, the top 25 cargo airlines last year saw traffic in scheduled cargo tonne kilometre (CTK) terms decrease by 3.3 percent year on year, which was still better than the overall industry decline of 9.1 percent. Among the African airlines, Ethiopian Airlines was ranked in the top 25. Ethiopian Cargo at 21st spot recorded 3,393 million in scheduled cargo tonne kilometres (CTKs) and it stood at 19th based on scheduled freight tonnes carried which was about 623,000 tonnes.
Meanwhile, Qatar Airways set an example for the aviation industry by remaining operational in most routes throughout the pandemic. “Since the start of the pandemic, we have never stopped flying and we ensured continuity of global trade by operating all our aircrafts (except the A380s), using passenger planes as passenger freighters and mini freighters too. This way we were able to support the vital flow of perishables among other types of cargo (eg: pharma, PPE kits, vital aid, general cargo, live animals, e-commerce goods etc.) around the globe despite the innumerable challenges faced. We have been agile and flexible in responding to our customers' demand and even opened up new routes during the pandemic,” said Kirsten de Bruijn, senior vice president, cargo sales and network planning, Qatar Airways.
More recently, in July 2021 Qatar Airways carried around 68 percent of cargo on its freighters (including mini freighters and passenger freighters) and 32 percent in the belly-holds of passenger flights.
Taking the P2F route
The national carrier Kenya Airways (KQ) had repurposed a few of its aircraft for cargo operations during the pandemic. “The cargo only passenger flights are giving us about 50 tonnes payload. So this is really good for the perishable industry. We are flying close to about seven schedules into Europe every week for perishables. So this is a very good capacity for the industry. We are fully supporting the horticultural sector,” says Peter Musola, Kenya Airways cargo commercial manager.
In line with this, the Fresh Produce Exporters Association of Kenya (FPEAK), on February 8, 2021, joined KQ and other stakeholders during the commissioning of the first ‘re-purposed Dreamliner’. The repurposing of the passenger Boeing 787 to a cargo aircraft was done in response to the depressed demand on the passenger side and the growing demand for air cargo capacity in Kenya and across the continent.
We are flying close to about seven schedules into Europe every week for perishables. So this is a very good capacity for the industry.
Peter Musola, Kenya Airways
“Demand for fresh produce, particularly fruits and vegetables, increased resulting in more sales at the marketplace. A number of development partners e.g., Trade Mark East Africa (TMEA) supported the horticulture industry by paying for 50 percent of the certification fees of different market standards like GLOBALG.A.P., GRASP, SMETA, BRC, Fairtrade, among others. This was crucial because it cushioned exporters from the high costs of certification and also ensured that exporters will still be able to access the various markets. Kenya Airways also converted a passenger plane into a ‘preighter’ so as to increase the capacity of cargo handling for the airline,” said Hosea Machuki, chief executive officer, FPEAK.
Air cargo gets back on its feet
The easing of lockdowns starting in May helped the ecommerce growth and strengthened the manufacturing activity to rapidly recover as the year progressed. Despite the impact of Covid on its belly-hold network, Qatar Airways managed to register a 5.5 percent increase in cargo traffic to 13.7 billion CTK in 2020 as it outperformed many of its combination carrier rivals.
For only cargo freight at Qatar Airways, around 17 percent of products consisted of perishables that were then transported globally. “We have a strong freighter fleet of 26 Boeing 777 freighters and six Boeing 777-300 mini freighters. We are transporting perishables on all these aircraft including in belly-hold passenger planes. Africa is an important market for us, with 27 destinations within the continent as part of our network served by our freighters and passenger (belly-hold) flights. We offer more than 180 flights each week with more than 2,900 tonnes each way, to and from Africa to our extensive network across our African network,” said Bruijn.
A significant milestone post the pandemic was that the belly capacity of Kenya Airways during pre-Covid times was on 80:20 ratio, where 80 percent was in the bellies belly while 20 percent was in freighters. But with the repurposed Dreamliners, the numbers shot up with 80 percent of the cargo going on freighters, while 20 percent was carried in the belly.
“Belly capacity is still minus 45 to 50 percent and we are still operating very sub-optimally. I think it should actually be even higher, somewhere around minus 60 percent. Also, most of the routes are not back to where they were pre-Covid, so the capacity is still very much reduced. We do know that this is partly driven by the vaccination and Covid-19 protocol requirements. They're so diverse across the globe. So until Africa really gets fully vaccinated, those restrictions will continue. I think the vaccination level in Africa now is somewhere around 4 to 5 percent. So it's still very low,” responded Musola.
Road to recovery
After the pandemic struck, the airlines also supported governments and countries with urgent deliveries of vaccines and essential medical supplies. Africa supported the aviation industry and kept jobs going, whether it was in the airport, the ground handling agents, and so on.
“The main impact for our major protocols here now was that a lot of the shippers could not access every capacity when the pandemic kicked in. So with all the passengers' schedules removed, we have moved from a minus 80 percent shortage and capacity to minus 10. We are actually doing a slightly better than the global index which is around minus 40 at the moment,” added Musola.
Business from the IATA standpoint
In April 2020, the IATA released data for the global air freight market which showed that the Nigerian and African airlines were less affected by disruptions due to the Covid-19. In 2020, the African airlines’ traffic fell 69.8 percent compared to 2019. Capacity dropped 61.5 percent, and load factor sank by 15.4 percentage points to 55.9 percent, which was the lowest among other regions. Carriers in the region have benefitted from somewhat less severe international travel restrictions compared to the rest of the world.
More recently, the African airlines’ international cargo demand improved in June 2021, as they saw an increase by 33.5 percent compared to the same month in 2019. This was the strongest performance of all regions, but notably on small volumes (African carriers carry 2 percent of global cargo).
Interestingly, the small Africa-Asia market was the most resilient route in April, down only 1.0 percent whereas the international capacity had decreased by 36.6 percent. As of September 2020, the belly capacity for international air cargo was 67 percent below the levels of August 2019 owing to the withdrawal of passenger services amid the Covid-19 pandemic. This was partially offset by a 28.1 percent increase in dedicated freighter capacity.
Challenges aplenty for perishable businesses
During the pandemic the fresh production export companies faced major losses and are yet to recover fully. “The whole world went into containment measures due to which marketplaces and movement of goods became restricted. Some of the horticultural produce was not classified as essential goods and some of the areas where this produce is sold were shut down. This reduced the demand for the produce and the business was low. The cost of freight also went up due to limited cargo space,” shares Machuki.
Managing and maintaining consumer demand and supply has been difficult for the exporters, but they have not stopped trying. FPEAK in collaboration with other industry players worked hard to ensure that the production of fresh produce is increased by building the capacity of the farmers to increase production as well as deliver on the different market requirements on fresh produce. They believe that as long as the production systems are complete by ensuring that producers have been linked to off-takers, the production remains sufficient and the rules of supply and demand have been met.
The Kenya Flower Council (KFC), Kenyan growers, and exporters of cut-flowers have been facing challenges, especially with freight rate and capacity. This has led them to think and optimise a different route for their business to keep going. “Sea freight is seriously being considered. We believe a combination of air and sea freight is the future. It will help us surmount not only the challenges related to freight capacity and cost but also stay environmentally sustainable,” said Clement Tulezi, chief executive officer, KFC.
Meanwhile, KFC is engaging with potential buyers and prospective entities through online engagements and becoming future-ready.
We believe a combination of air and sea freight is the future. It will help us surmount not only the challenges related to freight capacity and cost but also stay environmentally sustainable.
Clement Tulezi, KFC
“We are now exporting at around 90 percent compared to pre-Covid-19, but we are facing challenges in terms of freight cost, capacity, and Covid-19 restrictions, which are not allowing our exporters to physically meet with potential buyers and close business deals. The pandemic led to high freight costs as airlines opted to transport Covid-related equipment such as vaccines and medical equipment on a priority basis rather than horticulture produce,” Tulezi added.
Irrespective of the situation, the leaders of the perishable logistics industry seem game to adopt new developments and strategies to keep their business going. When the pandemic struck and businesses were scarcely operational, Qatar Airways still managed to develop and grow its business. They expanded their passenger flights into a number of destinations like Lusaka, Harare, and Abidjan, while increasing frequencies to certain destinations.
“This is good news for cargo in terms of belly capacity as that is primarily our business model. There have been a lot of developments like the launch of our sustainability programme ‘WeQare’ which is garnering a lot of attention and praise. During the pandemic, we have even launched new destinations and it has allowed us to maintain sufficient capacity and this has helped our customers to continue their activities. Qatar Airways has helped transport more than 500,000 tonnes of medical supplies and PPE to impacted regions,” Bruijn said.
During the pandemic, we have even launched new destinations and it has allowed us to maintain sufficient capacity and this has helped our customers to continue their activities.
Kirsten de Bruijn, Qatar Airways
In 2020, Kenya Airways expanded its fleet to different destinations. “One of the exciting developments during the pandemic is that we have opened a couple of new routes in 2020. We opened Delhi earlier this year and we have done a number of operations, including non-scheduled flights to Guinea Bissau, West Africa. We are looking at opening new routes, from Johannesburg to Lubumbashi, City in the Democratic Republic of the Congo, in September. This is a new routine, which is ramping up our site; which you can call an arm of South Africa,” explained Musola.
Meanwhile, FPEAK and other horticulture industry stakeholders are working with various counties like the North Rift Regional Economic Bloc (NOREB) and Lake Region Economic Bloc (LOREB) to boost the production of horticulture.
“FPEAK and other fresh produce stakeholders are working with the government of Kenya and stakeholders drawn from the logistics industry to increase the capacity of the various facilities in the country. TMEA (Trade Mark East Africa) has supported us in lobbying with the government and we have visited a number of facilities like Moi International Airport, Mombasa, Eldoret International Airport, Kisumu International Airport, Isiolo Airport, Mombasa port, Lamu port, Kisumu port, among others. Through these initiatives, there was a cargo plane that had fresh produce shipped to Sharjah International Airport in the UAE and also had Kakuzi PLC ship five containers (80 tons) through the Lamu port. The government has so far committed to improving the fresh produce handling capacity of various airports in the country,” Machuki added.
Digitisation, Automation leads the way
Though the perishable supply chain across the globe has been affected, it has also opened doors for adopting innovations as a way to respond to these challenges.
In 2019, Qatar Airways launched Goal22, a transformation journey that covers all functions within the Cargo. “Digitalisation is another area which is one of the key pillars of our strategy. On the perishables product front, we are installing a smart monitoring system in our cargo terminal to provide us with real-time information and data from the storage areas. This allows us to monitor the temperatures and take swift action should there be any temperature fluctuations. We have also invested in a sizable number of data logger types for use onboard our flights. These are standalone and real-time trackers that provide flexibility to our customers and help them decide what solutions to use in the market,” said Bruijn.
Digitalisation and automation are changing the way industries operate, and companies that embrace these innovations have a strong advantage. The emergence of new business models and focus on innovation either by optimisation of existing supply chains or exploring new modes of movement has led to changes in existing structures in terms of competitiveness, inclusiveness, scalability, and sustainability.
FPEAK says that they are working towards recovery and new developments this year. For the rest of 2021, they plan to keep lobbying with the government, markets, and development partners to support the export of fresh produce to various market destinations. They are currently working with the government and development partners like RTI through the Kenya Crop and Dairy Market Systems (KCDMS) to facilitate the re-entry of the mangoes in the EU and UK.
The unannounced pandemic situation has made the industry alert and pivot in order to be better prepared for the future. “To continue to grow and develop the business post-pandemic, we have a 5-pillar strategy for 2021 and beyond, called the “Big Five.” These are quality, customer centricity, products and services, digital future, and set an example. It comes down to always being available for our customer, being easy to deal with - also digitally, selling and marketing USPs and special services correctly, by being efficient, cost-effective, reliable, and ultimately emerging from the pandemic in a sustainable and with higher quality standards,” stated Bruijn.
“The impact of the pandemic has been humongous, and it cannot be fixed in one year. For any carrier, it will take a number of years to course correct. We are always forecasting airlines getting back to normal, optimal capacity in 2024. But we have a number of initiatives on the cargo side driving our traffic agenda and our strategic agenda. But from a holistic point of view, we can only recover by 2024. Yeah, I'll say 2024 2025 is really the forecast,” said Musola.
While on the fresh product side, FPEAK is slated to adopt product and market diversification in order to avoid overreliance on a single product and market. They are currently striving to diversify into other markets other than the traditional and existing markets.