Astral Aviation links the world to the ‘rest of Africa’
As Africa's regional economies enjoy healthy growth after decades of lethargy, cargo movements have been growing apace, bringing more and more international carriers to what has been referred to as the 'new frontier' for air cargo and for Nairobi-based Astral Aviation, this is big business.
April 1, 2011
While the mainline African and international airlines link the continent’s main hubs to the rest of the world, Kenya-based Astral Aviation has cleverly positioned itself as the leading cargo carrier linking the global players to the ‘rest of Africa’. Ten years ago Sanjeev Gadhia together with two non-executive partners started a small charter airline business that has emerged as a leading player in the region’s freighter business with seven scheduled services and 40 charter destinations on the continent. “Demand for cargo, especially into Africa, is high. We promote the movement of the cargo through Nairobi,” said Gadhia, adding that the airline was positioning itself to be the ‘African Freighter Solution’. Hub and spoke Astral goes about doing this by plying the spokes out of the Nairobi hub, to regional hubs and the smaller destinations, for the larger international and African mainline carriers for whom it is not practical to fly into the smaller locations. This includes scheduled services into Dar es Salaam, Mwanza and Zanzibar in Tanzania; Juba in Sudan; Kigali in Rawanda and Entebbe in Uganda. Currently Astral has more than 20 interline agreements for cargo with various international airlines – including the likes of Lufthansa, Singapore Airlines, Qatar Airlines, Martinair, etc – who fly into the NBO hub – including Kenya Airways and Ethiopian Airlines – and works closely with five global freightforwarders. “We are not aligned to any airline. We partner with many to distribute the cargo to various countries,” said Gadhia. Investment led growth The airline’s business has grown tremendously in the past five years, with new destinations being brought on board. Last year was significantly better in comparison to 2009 in terms of performance and volumes, although this is in part, was due to the recovery from the global economic crisis. “During the global financial crisis, we felt a sharp decline in cargo volumes and yields hence we had to embark on a cost-cutting and revenue enhancement measures which had a positive effect in 2010. Certain routes which were dependent on external factors such as tourism were reduced due to declining volumes,” Gadhia says. In 2009, Astral Aviation uplifted 5,132 tonnes on its intra-African network, while in 2010 it saw a 35 per cent increase in volumes, uplifting 6,844 tonnes aboard its fleet of four DC9 Freighters with 16 tonne payload. Imbalances are an issue Gadhia concedes, as the cargo is mainly one sided with full flights into the rest of Africa, but little cargo on the return to Nairobi. Typically the cargo makeup is comprised of general cargo, mining equipment, perishables, project cargo, relief cargo, telecommunication and power equipment. For international airlines operating from Nairobi, imbalances are not an issue as they typically carry general cargo, machinery, telecommunications equipment, consumer electronics etc inbound and then fly full loads of flowers, fruit, vegetables and fresh fish outbound to the Middle East and Europe. Demand for cargo has been on the rise in the past few years as economies in the region thrive, he notes, and this has seen the continent attract a lot of attention from international airlines keen on tapping the growth opportunities. “In my opinion, carries are seeing better volumes and yields into Africa, hence the new focus on the market,” he says. “In particular, positive yields are being experienced into West & Southern Africa while the East Africa region is relatively flat in yield at the current time.” Commodities are king Commodities are also key to the growth of Africa’s economies and hence air cargo. Increased investment in infrastructure, telecommunication, agriculture, and mining are some of the major drivers of cargo movement on the continent. “There are several areas in Africa which are experiencing good growth mainly in Nigeria and Ghana in West Africa, and Kenya and Ethiopia in East Africa in addition to the economic powerhouse which lies in South Africa. “Products such as oil-field equipment and mining equipment are in demand in West Africa while automotive products are in demand in South Africa,” he says. For cargo carriers operating in the African market, commodity prices play a major role in their business, with demand increasing when prices rise. “It’s a combination of an increase in commodity prices such as oil, copper, gold and industrial minerals which is resulting in high demand,” he says. The rise in gold prices, for instance, has seen increased mining activities in Tanzania’s Mwanza gold mines leading to movement of equipment and mined material, with Astral moving a substantial amount of the cargo leading it to consider a third flight on the route to meet demand. And cargo to and from the Democratic Republic of Congo and Zambia, is driven by copper mines, he says. “Commodity prices are a major driver of our business. When the prices are up we carry more.” The discovery of oil in Uganda is expected to increase demand for flights to the landlocked country, with airlines anticipating increased cargo demand driven by the need for specialised equipment and passenger numbers. “In addition, China continues to be the largest trade partner into Africa which results in significant Chinese investments in Africa. Many regions are experiencing new technology such as GSM connectivity which results in the increase of telecom cargoes into the region,” Gadhia says. And Nairobi is well-placed to benefit from this as it’s one of the leading cargo hubs on the continent – particularly as Kenya is a large exporter of horticulture products – along with Egypt, South Africa, Nigeria, and Ethiopia. Growth track Looking ahead, Gadhia says the company’s current strategy is based on a “cautious network and fleet expansion in our Nairobi hub which will result in the acquisition of MD83F which has a superior range and payload compared to the existing DC9F.” Astral expects to take on the two MD83 freighters this year. “We also plan to increase the scheduled destinations from the current seven to at least 12 destinations and the next strategy is to open up a second African hub in West Africa to serve a further 10 destinations,” he said. While road transport is Astral Aviation’s main competitor in the region, especially in Kenya, the poor infrastructure in the region, however, has played into the airline’s hands. Trade in Juba, the capital of Southern Sudan, has been on the increase leading to demand for air travel, especially between the city and Nairobi. Southern Sudan relies heavily on imports with cargo movement between Nairobi and Juba being on the increase. This has seen Juba emerge as Astral’s leading destination. To further tap into the opportunity in Southern Sudan, Astral opened a new customs warehouse last year to facilitate better storage and clearing of cargo at Juba airport. The airline was contracted to ferry electoral materials to Juba and other towns in Southern Sudan during the January referendum for which Astral deployed three aircraft to distribute the material. Another major route for the airline has been Tanzania, whose vastness has attracted leading regional airlines which connect various towns, mainly driven by cargo to Zanzibar – due to the tourism industry – and the mining industry in Mwanza.