Africa's agriculture and value addition magazine

Airline lowers flower cargo costs

Posted in Horticulture

ETHIOPIA - Ethiopian Airlines (ET) has offered a discount to Ethiopian horticulture exporters using its cargo service.

The offer came in response to the loss the export companies incurred due to the decrease in value of the Euro against the dollar and consequently Birr.

As of December 1, 2015, cargo prices will be reduced from the former rates by three to six per cent, a reduction by six to 10 US cents depending on the total volume sent.

ET sends two flower laden cargo flights to Europe daily. Each plane carries 85tn. The 120 Ethiopian flower exporters now collectively pay 218,336 Br less each day, and 6.55 million Br less every month.

The gesture, however, is not all philanthropic. Jet fuel prices have decreased significantly from where they were when ET’s cargo prices were first set. Jet fuel was sold at 2.48 dollars a gallon in August 2014 but now costs 1.39 dollars, almost half of what it used to cost.

“It’s not a significant change,” said Zelalem Messele, chairperson of the Ethiopian Horticulture Producer Exporters Association (EHPEA), “but it is encouraging. The reduction in price came after inquiries from a steering committee on the side of both the Association and the Ethiopian Horticulture Development Agency, EHDA.

“We are happy,” said the Manager of Saron Rose Agro Farm, speaking about the discount he thought made a significant difference. Saron Rose, a flower farm located around Sebeta, saw its revenue decline up to 20pc as a direct cause of the declining value of the Euro, since, mid last year.

“The company already prefers working with ET; other airlines working in this region, Saudi Arabian Airlines, Gulf Air and Emirates, are more expensive,” he said, adding that Saron Rose used other airlines only when ET’s cargo is full.

The Netherlands, which receives up to 80pc of the country’s total flower exports, is one of the three destinations included in the markdown of cargo pricing; along with two airports in Belgium:Brussels and Liège.

Horticulture, Ethiopia’s fifth biggest foreign currency earner, which according to EHDA represented about 10pc of the total earnings of the country for the year 2013/14, bringing in over 245 million dollars, is now suffering from the diminishing value of the Euro.

Because Europe is Ethiopia’s biggest destination for horticultural exports, exporters in that sector are directly susceptible to changes that occur in the Euro’s value.

Since May 2014, the Euro has recorded ever-decreasing value in the international ForEx market. Although it was being exchanged against the dollar at rates of 1.4 in March of 2014, it had slipped down to one in March of 2015.

April 2014 saw the Euro costing 26.9 Br in Ethiopia, but by March of 2015, it had dipped to 21.4 Br, a difference of over five Birr per Euro.

The pinch is most strongly perceived when companies are asked to pay for their international cargo fees in the local currency, estimated in dollar amounts, converted at exchange rates of the time.

Local banks buy the foreign currency these companies earn at the buying rate, 22.2093 Br, according to the Commercial Bank’s rate on Saturday, 28 November 2015, for each Euro.

The flower exporters are then required to pay for cargo services at Ethiopian Airlines in accordance after buying dollars from the bank at the selling rate of 21.4055 on the same day.

Flower exporters, therefore, buy dollars at a rate of 96 European cents, as opposed to their actual worth in the international market of 94 European cents.

Another flower exporter, Reta Workineh, Office Manager at Assela Flower Farm Plc, is also appreciative of the discount.

He added that they never use other airlines because logistical and technical provisions like cold room storage are not offered by the other airlines operating from Ethiopia. So far, they have only been able to send sample sizes of a flower variety that can live longer after being cut, he said.

“The airline has changed the box size it accepts from its clients, decreasing the height allowance by two centimeters,” he continued. “That will have an effect on the total weight,” he added, hinting at a way the airline could recover some of their losses.

Ethiopian Airlines receives the majority of business not only from horticulture exports from Ethiopia, but also from other sectors like meat and meat products.

Getachew Hagos, president of the Ethiopian Meat Producers & Export Association (EMPEA), said that although the sector had not been included in this discount, the Association’s relationship with the airline is amicable.

He said that in previous instances where the sector had trouble, they had approached the airline and been able reduce the rates charged per kilogram, gradually from one dollar to 95 US cents and then to 80 US cents.

November 30, 2015; http://addisfortune.net/articles/flowers-get-a-rosy-ride/