Nine African airlines in $1.5b jet fuel deal

Nine of Africa’s biggest airlines have launched a joint fuel project facilitated by the African Airlines Association (AFRAA) to cut the high cost of jet fuel.

The nine airlines participating in the deal out of the 32 AFRAA members are Air Malawi, Air Namibia, Air Seychelles, Ethiopian Airlines, Kenya Airways, LAM Mozambique Airlines, Precision Air, Rwandair and TAAG Angola Airlines.

The association  said January 12, 2012 in a statement that the Joint Fuel Purchase programme will see a total volume of fuel approximately 700 million litres valued at around $1.5 billion been procured by the nine airlines across their networks.

According to AFRAA, the project is aimed at attaining better and stable unit price of fuel for the participating airlines, assuring quality of the product and supply reliability whilst the relevant fuel suppliers will benefit from higher fuel volumes purchased by airlines.

Though the negotiations were done jointly, AFRAA noted that contracting will be done by individual airlines with the successful fuel companies at the various locations.

“The contracts implementation dates will vary, with some airlines starting to purchase fuel under the negotiated terms in February 2012. All contracts will however end in December 2012 and replaced by new contracts for a full calendar year in 2013 (and subsequent years) following another bidding, evaluation, negotiation and awarding process to be carried out during the course of this year,” the statement said.

Cost of fuel remains a major component of the operating expense of airlines, accounting for between 40-50% of total direct operating costs.

AFRAA which is a trade association of airlines from African states was founded in Accra, Ghana, in April, 1968, and is headquartered in Nairobi, Kenya. Its members represent 83% of total international traffic carried by African airlines.

By Ekow Quandzie