Eight African carriers join Ethiopian to buy fuel

The national flag carrier Ethiopian Airlines and eight other African carriers on Thursday announced an initiative to buy fuel jointly. The move is said to help the carriers make “significant savings”.
The African Airlines Association (AFRAA) said the joint fuel purchase programme for the nine airlines, which are all its members, has been launched following the conclusion of evaluation of tender bids received from a number of fuel companies.
The Group Finance Director of Kenya Airways, Alex Mbugua said that the total volume of fuel to be procured by the 9 airlines across their networks through the initiative will be about 700 million litres valued at around 1.5 billion dollars.
“This initial phase of the project involves only 9 of AFRAA’s 32 member airlines and we are confident that subsequent tenders will involve more airlines and more volumes,” added Mbugua.
Other than Ethiopian the airlines participating in the initiative are Air Malawi, Air Namibia, Air Seychelles, Kenya Airways, LAM Mozambique Airlines, Precision Air, Rwandair and TAAG Angola Airlines.
Two rounds of negotiations for the oil purchase were done jointly by the nine carriers. Contracting however will be done by individual airlines with the successful fuel companies at the various locations, according to AFRAA.
“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,” said AFRAA in a statement.
AFRAA says the process to launch the joint oil purchase first begun last year with the setting up of an AFRAA Joint Fuel Steering Committee chaired by Chris Oanda of Kenya Airways and with Yemane Fitwi of Ethiopian Airlines as his deputy.
The project helps the carriers receive a better and stable unit price of fuel, while assuring quality of the product and supply reliability, according to AFRAA. Fuel suppliers are also expected to benefit from higher fuel volumes purchased by the airlines.
Though the amount of savings airlines expect to make was not disclosed, the Kenya based African carriers’ association says all participating airlines are confident of significant savings, making the project very worthwhile.
Cost of fuel remains a major component of the operating expense of every airline, accounting for between 40-50% of total direct operating costs. In addition to the cost, the unpredictable nature of fuel price makes it difficult for airlines to budget the cost of their operations.