24 July 2018

Ethiopian Airlines, Dhl Sign Joint Venture Deal

Photo: The Observer
(File photo).

German logistics giant DHL has said it will sign a joint venture agreement with Africa's largest cargo operator -- Ethiopian Airlines.

The joint venture deal will see DHL use Ethiopian Airline's network to deliver its cargo.

This announcement comes barely three months after the two companies partnered to serve manufacturers in the newly established industrial parks and other major export centres in Ethiopia.

Ethiopian Airlines Group chief executive Tewolde Gebremariam last week told Bloomberg that the deal with DHL will be transformed "within weeks" into a joint holding that will offer the German firm a 49 per cent stake.

DHL is a major client of the airline, generating $50 million annually for Ethiopian Airlines' cargo business.

The news of the deal signals the first tenet of the recently announced privatisation plan for Ethiopian Airlines being pushed for by Prime Minister Abiy Mohammed, as Addis seeks to open up its economy.

"Out of our seven or eight business units, some will be attractive to investors and could also benefit from outside involvement," Mr Tewolde said.

"We are already in negotiations with partners, including Boeing, Airbus and Bombardier, with regards to our hotel business, airports and aerospace manufacturing," he added.

The new deal is expected to change the cargo transport business, as it will offer DHL a bigger share of the last-mile delivery services from the hubs and cities that Ethiopian Airlines operates in.

Storage and distribution centres

It is understood that the carrier is already in talks with global electronic giants like General Electric (GE), Samsung and Techno Mobile to set up their storage and distribution centres in Addis Ababa, which will then allow the airline exclusivity in providing shipment services within the continent, with DHL undertaking the last-mile connectivity.

Ethiopian Cargo boasts eight dedicated cargo aircraft -- six B777-200 and two B757-200 freighters, and it is expected to receive two more B777 freighters worth $615.4 million.

It has a daily uplift capacity of more than 8,500 tonnes.

In June 2017, it opened up a new cargo terminal at its Bole airport hub in Addis Ababa, constructed at a cost of $150 million to handle 600,000 tonnes.

It is an improvement upon the existing terminal, which can handle 400,000 tonnes, pushing its handling capacity past the one million mark.

The cargo terminal, which now boasts capacity equivalent to cargo terminals in Amsterdam, Singapore and Hong Kong, comprises a dry cargo terminal warehouse, perishable cargo terminal with cold chain storage as well as fully automated elevating transport vehicle technology.

"We have made investments in infrastructure projects to modernise and expand our cargo facilities," Mr GebreMariam then said.

"The new cargo terminal, combined with our existing one, will give us a total annual tonnage capacity of around one million tonnes, which is the largest on the continent of Africa," he added.

Airfreight market

The latest data from the International Air Transport Association (IATA) for the global airfreight markets shows that African carriers posted the fastest growth in year-on-year freight volumes, up 15.6 per cent as at December 2017, and a capacity increase of 7.9 per cent.

"This contributed to an annual growth in freight demand of 24.8 per cent in 2017 - the fastest growth rate of all regions. This is only the second time African airlines have topped the global demand growth chart since 1990. Capacity in 2017 increased 9.9 per cent. Demand has been boosted by very strong growth in Africa-Asia trade which increased by more than 64 per cent in the first eleven months of last year," IATA said.

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