African airlines in joint fuel deal

The African Airlines Association and its member airlines have signed a joint fuel purchasing contract to profit from economies of scale.

The initiative signed in Nairobi is expected to help about nine airlines cut the erratic fuel prices that make up to 40 per cent operational cost of the airlines.

"Fuel is our most significant cost absorbing between 30 to 40 per cent of our annual operation cost, conclusion of our joint fuel procurement contract would now enable us to cut cost and remain profitable to compete with competitors from other continents," said Alex Mbugua, Group Finance Director Kenya Airways.

"We have gone through the bids from various fuel suppliers from our respective destinations and agreed on terms, savings are enormous though we are still calculating the exact figures," he said. It is estimated that the 150 aeroplanes operated by nine airlines in Africa consume close to 700 million liters of fuel in a year, it translates to $1.5 billion expenditure on fuel alone.

Kenya Airways said fuel takes between 30 and 40 per cent of annual operational cost, "The per centage at times is higher depending on prevailing conditions," said Mbugua.