Podcast: Astral’s Gadhia on African market, fleet growth

Jeff Lee
Hello and welcome to this episode of cargo facts connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m Jeff Lee, editor of cargo facts and it’s Friday, the 17th of November. This week, I was at the Dubai Airshow, where plenty of passenger-related announcements dominated the headlines. Of course, that doesn’t mean there aren’t things happening in the freighter segment. and that’s certainly true of Astral Aviation, based in Kenya. I stopped by Astral Aviation’s booth to catch up with founder and CEO Sanjeev Gadhia.

Jeff Lee
Hi, Sanjeev. Good to see you here at the Dubai Airshow. First of all, how has the show been for you?

Sanjeev Gadhia
The show has been really great, Jeff, welcome to the astral aviation booth. We’re the only African airline to be present here. And we also feel that in terms of cargo cargo is not represented very well at the Dubai Airshow. I wish there were more cargo airlines, you can just call them by with your fingertips. So Dubai is a very important hub for us. It is a second largest hub after the Nairobi hub. And we place a lot of emphasis in Dubai. The opportunity of being an exhibitor here has been amazing. We’ve been able to connect with our clients and also with our partners.

Jeff Lee
And yeah, so speaking of Africa, we all know what the rest of the world is like in terms of a slowing market. What’s your perspective being based in Kenya,

Sanjeev Gadhia
When I look at the African market, I can divide it into two categories, intra Africa and out of Africa. So when you look at the intra African market, the market is still doing very, very well. We’re seeing very good load factors on the interest frequent sector, which we cover from our Nairobi hub. And we’re actually seeing a market which is going to grow next year, because we’re seeing more trade between African countries. And we’re seeing more and more cargo coming through over Nairobi hub. So it’s such a pleasure and opportunity for us to be in Nairobi, which is the premier cargo hub. We’ve got five si terminals, we’ve got the best handling, and the best facilities that are there. And we have a lot of airlines also coming into Nairobi. So the intra African market, I would say, compared to 2022 has actually grown by about 5%. But next year, we expect we’re going to be expecting a double digit growth. And we’re very confident about the long term growth of the inter African market. Having said that, the market to and from Africa has not done very well unfortunately. Some of the key markets, such as South Africa, has actually experienced overcapacity, which has resulted in lower yields. And what we’ve actually seen also, Jeff, is that we’ve seen the amount of cargo volumes are dropping by as much as 30% into Africa. And when you look at markets like Lagos, Johannesburg, Nairobi, Addis Ababa, we’re seeing a significant reduction in payload. And that has also resulted in significant reduction in violence. When you look at the perishable exports from Nairobi, Nairobi is the biggest perishable hub in Africa. Nairobi accounts for a significant amount of perishable exports, I would say about 250,000 tonnes of perishables exported. So when you’re looking at the perishables market, the perishables market has actually been stagnant, I can’t say that we’ve seen any growth, it is the same level of growth. And the reason for that is the recession in Europe, Europe, is not buying as many flowers as they were like before. So we’re very lucky that the period between 2022 and 2023, has not seen the growth but we have not seen a decline. What we’re actually seeing also is low volumes going into the Middle East. So we’ve actually been flying into the VI, we’ve been operating sheduled services, we’ve been getting a lot of flowers, where Jared, we’ve seen a 15% increase on our load factors into the wild. However, there’s a problem because from Dubai back into Africa, we are actually seeing a situation where there’s a lot of cargo blowby going belly capacity, that is actually more or less made it a bit difficult for us to optimize or the return sector.

Jeff Lee
Well, you know, with the growing market within Africa, you’re also planning to grow your feet to match that. Now, do you have several, I guess, several on several fronts, but let’s talk about the 767 or the medium widebodies side because you’ve got 1767 200. But you I think you’ve previously said that you wanted to add a 300?

Sanjeev Gadhia
Yes, we have deferred of a Boeing 767 300 delivery from August 2023 due to market conditions, and we’ve deferred it to quarter one of 2024. We have been looking at the Boeing 767 300 for a while and we’ve been very fortunate that ATSG which is the world’s largest lessor of the 767 300 has been very supportive of our 767 200. It is also from them so we have plans to acquire two Boeing 767 300 freighters, one which we differed from others distribution we’ll be expecting to take delivery in April. Then we’re looking at the other one, which we will be looking at by the middle of the year. The 767 300 is a very important part of our strategic fleet expansion. And it will actually enable us to also look at operating into new markets which the 767 200 Is able to. But in addition to the Boeing seven, six sevens, we’re also the launch customer for the Embraer 190 freighter scheduled to arrive in November 2024. We’re been working very closely with them prior, we’ve got a lot of fantastic data, we’re really excited because the Embraer 190 freighter would make a very, very good freight and not only in Africa, for the Hubot spoke. But we believe that the seven the brave 190 freighter would also do very well in Europe. We are also considering placing the Embraer 190 freight on a European AOC, which will enable us to offer it to the integrators and to some of the postal companies on an ACMI basis. So we were putting a lot of bets on the Embraer 190 freighter, we have plans to become the largest employer when it freighter operated the world. And we believe that that segment of the 12 to 13 tonnes is a segment which will do very, very well for E commerce, oil and gas at the postal companies. And when you’re actually seeing loads coming down for the classics, we feel that there probably will be a very good option, which could fill the gaps of the gray one it is also the cards. And then of course, in addition to the 777 300 and the E 190. We also we’ve also got LOIs for the A 330 300. However, due to delays are being experienced by EFW, it’s quite likely that those aircraft would actually arrive after 2025. So we may still consider it right. But it all depends on how we experience 2024. And last but not least, the aircraft and I’m so optimistic about is a triple seven 300 the twinjet I think that aircraft will do so well out of out of Africa. And because the 747 carries a lot of perishables, we believe the payload to volume ratio on the triple seven 300 would actually be better than the 747 400. So we are very, very keen, we’ve had a very good opportunity to have some preliminary discussions with icap, we’re not ready yet to make a commitment. But we expect that by the first quarter of 2024, we would be looking at taking on a very big commitment for the triple seven, three hundreds. And we are very confident because we’ve seen this project from inception, I’ve had the opportunity of being in Tel Aviv to see the first triple seven, that I believe in the quality of IAI and the expertise of together, the triple seven will be a game changer. So this is the aircraft that I’m the most optimistic about. And it is an aircraft for the next generation. Right.

Jeff Lee
And I mean, today we’re just in the second prototype, something else to see it.

Sanjeev Gadhia
When I look at the growth of the perishable sector in Africa, I believe the triple sevens will actually give us a better range, a lower cost per ton. And then of course, we will also have a lesser impact on the or the environment. And this is something where we feel that the 747 is losing outcome. But because the triple sevens are delayed because of the STC, and various other reasons, we remain very confident that as soon as they’re ready for service, we will actually be one of the happiest customers.

Jeff Lee
Just lastly, you were talking about your potential AOC and Europe. What can you tell me about that? I mean, how long has it been in the works and where Europe? Exactly.

Sanjeev Gadhia
So Jeff, because of the market conditions, we’ve actually postponed our decision to acquire a European MC and we feel that the Irish AOC would be the best one for us. We’ve spent a lot of time on it, is that the market conditions and because of the delay of the a 330 300 frequence, which is what we wanted to place in Europe, we actually decided to postpone our decision by 12 months. However, in the interim period, we’ve actually been having some discussions with another AOC partner, who would be very, very keen to provide us with AOC support for our Embraer 190 freighter project. And this is something that we will be looking at as an interim measure until such time that we can actually be able to restart our clients for the new AOC because a new agency takes up a lot of resources. It takes up a lot of time. And we’ve actually felt that this may not be the right time. So we’ve decided that let’s try and do it when the market conditions have improved. And when we get a more realistic arrival date on the A333 You have grids, because the Boeing fleets the employer free to continue to be supported on the astral you see, but the Airbus 330 300 would prefer to keep it on the for the EOC. Right. Interesting.

Jeff Lee
Well, you’ve got a lot of projects in the works. But we look forward to seeing these happen to catch up with you soon, maybe in Amsterdam in February.

Sanjeev Gadhia
Definitely. I think I will definitely be there. And I look forward to seeing you there. And I’d like to thank you for coming by right to the Astral booth.

Jeff Lee
Thank you so much, Sanjeev.

Sanjeev Gadhia
Thank you, Jeff.

Jeff Lee
That was Sanjeev Gadhia, founder and CEO of Astral Aviation, joining me live from the Dubai Airshow. And that’s it for today. For more multimedia coverage like this search cargo facts connect on iTunes and Spotify and visit cargo facts.com. Thank you very much for tuning in, and join us again next time.