Volumes grow but overcapacity hits yields at Ethiopian

As a major player in the African market, Ethiopian Airlines has suffered from declining yields caused by overcapacity, but Ethiopian Cargo managing director Fitsum Abadi (pictured below) says cargo traffic has grown strongly.

He says the industry has seen huge capacity growth compared to demand, primarily due to extra space on wide-body passenger aircraft, hitting load factors and reducing yields.

Describing the market as a whole, Abadi tells Air Cargo Week (ACW): “Demand has reduced mainly due to fuel cost reduction, India market slowdown and the decrease in exports has led to significant air cargo drop. Moreover the excess capacity deployed from belly hold of PAX services has also eroded the yield.”

He says South Africa has been hit by a decrease in imports, especially spare parts due to weak demand while oil producing nations, in particular Nigeria, have been significantly affected by lower oil prices.

Despite this, the fourth quarter was very good, Abadi comments: “Since 2010, we have not seen a better quarterly YoY performance than in Q4 of 2016: chargeable weight increased by 7.5 per cent YoY.”

He adds: “Regarding Ethiopian airlines, as part of global air cargo industry has suffered from yield reduction but cargo traffic has growth by around 13 per cent as compared with previous year.”

Abadi says 2017 has started well with demand and yields increasing, and he tells ACW: “With the strengthening USD, yields measured in other currencies actually grew even more. Rising oil prices may have played a role in these yield movements.”

He believes there are many opportunities in Africa, as the continent is home to 12 per cent of the world’s population but less than one per cent of the global air service market. It has a very cheap labour force, which should create demand for air cargo services, and fast growing economies.

But difficulties remain: “African countries needs to work on the underneath items to accelerate the growth of air cargo business.”

Abadi tells ACW restrictions on overflying and navigation permits need to be improved, so does infrastructure, and the continent of 54 countries has 54 frontiers for different custom requirements.

He also says infrastructure growth is low, trade links between countries are poor and intra-African trade is a fraction of intra-regional levels in Asia, all of which make for a challenging business landscape. Read more here