African airlines agree joint fuel purchases

STRATEGY: KQ was among nine airlines that participated in the first joint fuel purchase

THE Association of African Airlines has resolved to continue with the joint fuel purchase agreement for interested members albeit with some changes to the tender process. AFRAA joint fuel purchase steering committee which met in Addis Ababa last week reported that participating airlines had all reported benefits thereby validating the project. “Five new (airlines) expressed their intention to join the project at the next tender and the committee agreed to vet the members to access their admissibility in accordance with the guidelines formulated during the meeting,” said AFRAA in its latest newsletter.

Burdened with the ever increasing cost of fuel on the cost of operations, nine airlines teamed up in January to buy fuel jointly so as to benefit from better bargains through increased negotiating power. Fuel alone accounts for between 40 to 50 per cent of an airline's direct cost whereas the direct costs for regional airlines are at an average of 70 per cent of all expenses incurred according to AFRAA. “A detailed action plan for the next tender was developed and is scheduled to start in July 2012. The plan would ensure that the tendering process would be complete by the end of the year,” noted AFRAA.

In the first agreement only nine airlines out of the then 32 member airlines of the association were part of the deal. The nine were: Kenya Airways, Ethiopian Airlines, LAM Mozambique airlines, Air Malawi, Rwandair, Precision Air, Air Namibia, Air Seychelles and TAAG Angola Airlines. The nine airlines started enjoying the joint purchase at different times due to inconsistent financial year periods. However the committee resolved to synchronise the tender periods so that all contracts run from January to December 2013.

Joint fuel purchase project is part of AFRAA’s three year business plan unveiled in February 2011 to give fresh impetus to the association’s efforts to lobby for a favourable business climate amid high costs of operations. Aside from the problem of airlines having different financial year periods, the project has also faced a challenge in making payment in areas with foreign exchange constraints which was becoming a major problem with some fuel suppliers.

Meanwhile the association's membership has now risen to 36 after new airlines namely Camair-Co from Cameroon, Starbow Airlines from Ghana and Congo Brazzaville based ECAir's applications to join were approved last week.

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