Air Transport

We all know the poor infrastructure in most parts of Africa. For a one week safari, it is a challenging bone rattling experience. However, for a business that needs to move goods and people around, it becomes a costly experience buying and maintaining vehicles.

Air transport offers speed and cost savings from vehicle maintenance. It comes at a much higher cost and is therefore best for high value goods or human transportation.

Among Nairobi, Lokichogio, Juba, Kampala, Arusha, Goma, Addis, Lumbumbashi and Mombasa, there is enough commerce to support a low cost carrier. Competitive pricing can further encourage people to take flights rather than spend hours on end on the road.

Challenges for a low cost carrier include expensive jet fuel, access to the said jet fuel in some airports/airstrips, licencing, maintenance of the aircraft with spares not being locally available and proper flight monitoring and financial management.

Subsectors of the air transport include charter helicopter services and small charter carriers. These are especially useful for politicians for charter helicopters. The tourism industry, Aid agencies and horticultural farms are ideal clients for charter flights. One popular airplane is the Cessna Grand Caravan. With capacity for 13 passangers, 7 hr endurance, relatively accessible maintenance expertise and spares and a short runway capability, the airplane is a suitable candidate for the charter plane space. In addition, there are plenty of pilots with hours and rating for this plane.

Pilot availability, experience and reliability is a key factor in the industry. With a pilot training schools at Wilson Airport, plenty of young, smart well educated Kenyans and access to practice planes and landing strips, there are enough pilots to go around.

A well managed cessna grand caravan doing 120hrs a month can gross $65 to $70k with net margins in the 10% to 12% range. This assumes an operation with only one aircraft. Multiple aircraft operations have economies of scale and can net better margins.

Key success factors include competitive fuel pricing, access to maintenance facilities, ability to network with NGOs and Government organizations to generate business and proper financial and operational management.

As the economies in this part of the world grow, population increases and per capita income grows, it is expected that more people will seek to fly rather than drive. This creates opportunities for further growth.

In addition, there is tremendous potential to further increase the price competitiveness of air transport with current R&D on biofuels. Fuel cost is about 30% of operating cost and any savings their could positively impact the bottom line.

While the above discusses the grand caravan in greater detail, I believe that an overall growth in air transport in this region could positively impact the overall economy. This is because the region benefits primarily from horticulture and tourism. Two industries that stand to reap exponential gains should fast, efficient transport means be accessible and affordable.

Google.org seeks to fuel the growth of SMEs in East Africa. One way to do that would be to buy cargo space at wholesale and contract pricing for airlines flying to Europe and Dubai and through technology, work with smaller farmers and horticultural produce exporters to resell that space to them at cost. This would greatly improve the margins of these SMEs. This is because for small and media size exporters, air transport cost of their fresh produce constitutes 50% of their CIF costs.

This provides an overview. I am always happy to provide further details or answer questions. If I don't know the answer, I bet I can find someone who does.