Africa: New challengers for the cargo king’s crown

The domination of the regional air cargo market by non-African carriers, such as Air France-KLM, Emirates and Lufthansa, and by South African Airways, is still strong, but over the past decade two African carriers have risen to challenge them: Kenya Airways and Ethiopian Airlines.
South African Airways (SAA) was once the king of the continent, but the crown on its head now sits uneasily. Other African countries are catching up on South Africa, in terms of economy and infrastructure, and SAA itself is struggling with its senior-management upheaval, which has seen it go through five changes in leadership over two years.
On top of that, acting SAA chief executive, Nico Bezuidenhout, confirmed this month that the airline is “technically insolvent”.
The airline is now reliant on government guarantees, already Rand 1.2bn ($103m), but whether those will continue is uncertain.
With regards to the airline’s cargo business though, there have been three recent developments that could help with its recovery.
The first was Air China and SAA’s strengthening of their bilateral cooperation within the Star Alliance, with both airlines reconfiguring their networks to provide better passenger and cargo services between South Africa and China, and countries adjacent to both.
The second was SAA substantially increasing frequencies on its intra-African network, including to Harare (Zimbabwe) and Maputo (Mozambique), with Kinshasa (Democratic Republic of Congo) and Mauritius to follow soon.
The third was the announcement in December of a greater strategic partnership between SAA and Etihad. The Abu Dhabi flag carrier has been investing into multiple airlines recently, so a similar investment into SAA is expected, which could stabilise its financial woes.
With the Middle East’s growing role as a global cargo hub, a deal that links that with Africa’s regional hub introduces interesting alternatives to existing networks between Kenya, Ethiopia, Dubai (UAE) and China.
However, Kenyan and Ethiopian’s rise may not give SAA the time it needs to recover. Cargo tonnage for Kenya Airways (KQ) rose 8.4 per cent in the first six months of 2014, following an increased sales effort and the rollout of freighter destinations within Africa. However, its Safari Connection 747-400F service, jointly operated with KLM and Martinair Cargo, also folded last year.
New chief executive Mbuve Ngunze says cargo will remain a vital part of KQ’s future success, despite the temporary suspension of the Safari Connection. “I’m optimistic about regional cargo,” he says, “especially for Nairobi to become a hub for cargo freighters.
“It doesn’t make sense to fly a big freighter into Africa and then make hops around the continent. More people [are] coming into Nairobi and dropping off cargo to transfer into the region using our distribution capability.
“We converted two narrow-body regional freighters last year and are working on making them a solid business proposition.
They and their network are now settling in and the team is working well.
“We’re building a good platform for the future. Later, once we have coverage of the narrowbody sector, we will think about what else can complement that business in the longer term.”
While KQ’s cargo future looks good, Ethiopian Airlines’ looks certain. Now the cargo giant of the continent, it is currently implementing a 15-year Vision 2025 strategic plan that specifically supports the country’s huge export of perishables by rapidly expanding the airline’s cargo fleet and infrastructure.
As well as the massive belly capacity it has in its fleet, it also has two 757-200 passenger-to-freighter conversions, five 777Fs with two more on order and two MD-11Fs. On top of those, in December it secured a $41.4m seven-year junior loan from ING Capital to help buy two more 777Fs.
In 2014 alone, Ethiopian added 14 aircraft to its fleet, including five 787 Dreamliners, one 737-800, one 777-300, two 777Fs and four Q-400 aircraft.
It is also building a new cargo terminal with both cold and dry storage facilities, capable of handling 1.2m tons of cargo annually, making it one of the biggest in the world. These days, with shippers demanding better care of their cargo, it will be facilities such as these that could make or break airlines’ success on the continent. 
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