Dar-Addis hub deal doesn’t augur well with ATCL future prospects

NEWLY acquired ATCL Bombardier aircraft. The national flag carrier’s future cargo business is at stake with Ethiopian Airline tipped to dominate cargo fleet in the country.


ETHIOPIAN Prime Minister Hailemariam Desalegn flew back home after his two-day state visit last week with a bag full of goodies, one being a deal for Ethiopian Airline to establish a cargo hub in Dar es Salaam.

President John Magufuli said the deal will enable Addis Ababa to expand alternatives, linking its ports for imports and exports through Dar es Salaam.

For the Ethiopians, the envisaged cargo hub is a big score, because the facility will enable the horn of Africa nation to continue strengthening its muscles in Africa’s airline business. As of 2013, Ethiopian Airline already had the largest dedicated cargo fleet in the continent with eight freighters.

Currently, Africa’s dominant airline that serves over 24 destinations in Africa has its major hub in Addis Ababa and another outside Ethiopia, in Lome, Togo. The envisaged Dar es Salaam cargo hub whose construction is scheduled to start soon, according to experts, will be the largest in Africa.

Yes, with the hub, come some advantages to the host country--stimulation of air business and facilitation of horticulture exports without necessarily using the long trade route through Nairobi, Kenya. Exporters too may, depending on a number of issues, find it cheap to airlift cargo consignments using the local hub. President Magufuli assured the Ethiopians that they indeed may start using the Dar port to ship in their cargoes, pending construction of the hub.

Generally, sea-bound cargo consignments are slow in nature and sometime heavy. There is little sense shipping goods to Dar es Salaam and then airlifting them to their final destination.

Why not transport them directly from origin to final point! Through the cargo hub, the Ethiopians will grab the available vast business opportunity in Tanzania before the wings of Kilimanjaro, the newly revived Air Tanzania Company Limited (ATCL), is well positioned in the airline business. Geographically, Tanzania serves as a good gate way to many countries, which do not have stable airlines. And, that is the opportunity, which the Ethiopians want to fully exploit.

Through Dar es Salaam, goods from import countries, especially Asia, will be easily distributed to their final destinations in the neighbouring countries.

Ethiopian Airline has, from the Lome hub in Togo, successfully served Douala, Accra, Bamako, Abuja, Malabo, Libreville, Ouagadougou, Port Harcourt, Cotonou and Abidjan. The hub-deal, in a medium and long run, destroys the ATCL future prospects to expand to cargo business, which will already be under the monopoly of the continent’s giant carrier.

Through the Dar cargo hub, Ethiopian Airline will serve export and import traders from DR Congo, Zambia, Rwanda, Uganda, Burundi, Zimbabwe, Mozambique and even Congo Brazzaville. With Ethiopians dominating the business, Tanzania will earn peanuts from the hub, not even taxes because transit goods are not taxed.

The country may end receiving merely royalty and some PAYE taxes from local employees. But, because other information on the deal were not disclosed, it remains hard to exhaustively analyse the deal.

However, if the Ethiopian Airline has entered into joint venture with ATCL, that is a great bargain, for the national carrier will also benefit from the business’ profit. Yet, the best deal would have been to start building ATCL capacity on cargo business.

The Ethiopian Airline seems that strong because it has been operating for almost 80 years, without government interference. Tanzanian government also could have tasked ATCL management with development of a strong freighting division. Getting a used freighter, through leasing or higher purchase, is not that costly.

Experts say Boeing 767-300 is good freighter and can be obtained at dry lease for between 220,000 and 360,000 US dollars, monthly.

Freighters are not expensive because their conversions are mostly effected on older aircraft which are no longer suitable for passenger use due to noise, changing safety requirements or have become uncompetitive in passenger airline services. Cargo emerged as the solid pillar of the airline industry in the 1990s and today it’s estimated to account for between 10 and 20 per cent of airlines’ profits.

Industry expert estimates that 15-20 tones of air cargo is worth between 30 and 40 economy passenger seats, when both are on passenger planes.

Giving the Ethiopian Airline the hub space, in another words, is like the father surrendering his lone plot to a neighbour’s son to construct a house, simply because his son is financially incapable to develop the land.

One, wonders what will become of the son once he has accumulated resources!

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