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Drop in fuel price fails to lift transport sector

By | May 28th 2009 | 2 min read

By Jackson Okoth

Despite easing inflationary pressure in the transport sector as a result of a drop in fuel costs, indicators point to a slowdown in road transport.

This is according to a first quarter review report, 2009, published by CFC Stanbic Financial Services Ltd.

According to the Kenya Motor industry which tracks the number of vehicles sold per annum, 2,347 automobiles were sold in the first quarter, implying that estimated sales this year could be below the 13,135 vehicles sold last year.

It is expected that sales of heavy trucks, large and medium size buses and prime movers will decline significantly this year, says the CFC Stanbic Financial Services(CSFS) report.

Performance in the air transport industry is also expected to remain bleak, with IATA forecasting a $2.5 billion collective loss in the global air transport industry.

Recently, national carrier Kenya Airways announced a profit warning for the fiscal year ended March 31, this year stating that profitability for the period was expected to drop by at least 25 per cent. "Due to the global economic downturn, we expect reduced capacity in the industry as airlines strive to maintain reasonable load factors in the wake of decreased passenger and cargo traffic," says the report.

Gloom future

It is also expected that later in the year, benefits of lower jet fuel costs should impact on the bottom line of the domestic national carrier as forward contracts which were previously locked in at higher prices expire.

While the economic growth fell 1.7 per cent last year from 7.1 per cent in 2007 due to post-election violence, bad weather and the global crisis, the Government expects it to recover slightly this year.

This year’s economic survey report paints a grim picture for the transport sector’s performance this year. For instance, commercial passenger air traffic dropped from 7 million in 2007 to 6.4 million last year. This trend could continue as global recession persists.

Similarly, rail transport is already on a slowdown, with freight tonnage transported decreasing by 23.4 per cent from 2.3 billion in 2007 to 1.8 billion tonnes last year.

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