Lower jet fuel price doesn’t mean win-win situation for airlines: Astral CEO

April 11, 2020: The pandemic and the oil-price shock are likely to tip Africa into an economic contraction in 2020, in the absence of a major fiscal stimulus. The Covid-19’s economic impact finds that Africa's gross domestic product (GDP) growth this year could be cut by three to eight percentage points, McKinsey report states.

Along the similar lines, at the recently concluded webinar by Logistics Update Africa on ‘Delivering cargo in the times of continental contagion: From essential supplies to critical medicines’, Astral Aviation CEO Sanjeev Gadhia said, “We have seen the lowest fuel prices in the last 25 years and looking forward to having a better financial performance. At the same time, disadvantages are for economies like Nigeria, Angola, and Cameroon which are dependent on fuel prices.  Lower jet fuel price doesn’t mean that it is a win-win situation for airlines. When we are benefitting from low fuel prices, we are equally losing out markets with high load factors. Once we used to fly 300 tonnes a week to Nigeria, which has now been reduced to less than 80 tonnes. It is having a negative effect on the air freight market. We are doing double and triple drops to optimise our operations now. Overall, a lot of African countries will become weak in terms of GDP.”

In the first week of April, the International Air Transport Association (IATA) strengthened its call for urgent action from governments in Africa to provide financial relief to airlines as the potential revenue loss by carriers reached $4 billion. This translates into a drop of industry revenues of 32 percent for 2020 as compared to 2019.

Commenting on supply and demand mismatch and higher freight rates, Gadhia stated, “There is a lot of demand out of Nairobi to Europe, especially vegetables. But the supply inbound into Africa is very weak. To match our demand with the supply, we have started flying 2 B747Fs three flights a week from Nairobi into our Liege hub. We are operating our aircraft for 14 hours a day. We would like to optimise 747s by carrying 100-110 tonnes of vegetables with other cargoes so that the capacity utilisation is done.”

Kenya has witnessed a reduction in capacity from 5,000 tonnes to 1,300 tonnes since the national carrier along with other carriers ceased to fly.

Meanwhile, Astral which has received approvals from the Kenya Civil Aviation Authority (KCAA) is planning to deploy its Flyox drone (capacity of up to 2,000 kilogrammes) to deliver personal protective equipment (PPEs) to Uganda, Rwanda, South Sudan, and Congo soon. "We have factories manufacturing face masks in Kenya and by the end of April, we don’t need to import from other countries. Even we can send it across our regional economies," he noted.