Inside Ethiopian’s plan to dominate African skies - The Citizen

Inside Ethiopian’s plan to dominate African skies

Wednesday September 11 2013

Andualem Sisay

In the 1940s, the American aviation market witnessed a major breakthrough when Trans World Airlines (TWA), then controlled by the famous American maverick film producer Howard Hughes, emerged as the pre-eminent competitor to Pan American World Airways’ monopoly of the country’s air travel.

During the Second World War, TWA also produced aircraft and spying equipment for the US government, according to documentaries on the secret life of the business magnate. Following the end of the war, the government was left with a surplus of aircraft.

These airplanes are now behind the success stories of some modern-day airlines, after the US decided to use them to cement partnerships with other countries while also looking to counter the expansion of the Soviet-led communist bloc.

The US government also used TWA to train pilots from across the world, while helping to establishing national airlines for countries in Europe, Middle East and Africa where it set up its air bases during the Cold War. These include Germany’s Lufthansa, Saudi Arabian Airlines, and today’s Ethiopian Airlines (known simply as Ethiopian). Ethiopian’s international flight story begins in April 8, 1946 when it flew to Cairo using one of the five surplus C-47 aircraft acquired from TWA with whom it established the joint venture, the Ethiopian Airlines INC.

The national carrier, which is now fully owned by the Ethiopian government, has since become one of Africa’s top airlines, with a total of 59 aircraft and 7,300 full time employees.

It has over the years braved a number of important challenges to remain in the skies, including pressure from the country’s former communist regime to dump the US and buy Soviet planes instead.

Big deliveries

Over the past seven years Ethiopian’s revenue has grown by an average of 25 per cent. The airline recently announced $107 million in annual net profit for 2012/13, a 178 per cent leap from the previous year.

The profit comes as a result of transporting 5.5 million people and 174,000 tonnes of cargo, with 190 daily flights and 1,330 weekly.

It also received a record number of 14 new airplanes and set up nine new stations across the world last year.

“We’ve got new airplanes [such] as the B787, B777 which were fuel efficient so our fuel cost is managed, although our fuel cost has gone up,” said Mr Tewolde Gebremariam, the chief executive officer of Ethiopian.

Mr Tewolde Gebremariam, the chief executive officer of Ethiopian Airlines.

“Also the fact that we’ve got the airplanes, and are able to open nine new stations, that enabled us to grow the revenue, but the management was prudent in managing costs, so the cost hasn’t grown as much as the revenue, allowing us to register very good profit,” he said.

The revenue boost followed its membership to the Star Alliance last year and the arrivals of Boeing Dreamliners that are said to save up to 20 per cent in fuel consumption.

Of its total 13 orders, Ethiopian--the first airline outside Japan to own the model--has already received five Dreamliners so far. Next year it expects to bring in an additional four of these planes which are also said to cut carbon emission by 20 per cent. In addition to US airplanes, by 2016 Ethiopian also expects to get some 14 Airbuses from Europe.

As Africa’s trade and investment within itself and the rest of the world is on the rise, Ethiopian is eying this opportunity to expand its business and contribute to the continent’s growth of the continent. Currently, about 80 per cent of flights to and from Africa are operated by non-African airlines.

“We have to develop African aviation, it is our continental obligation. We (African airlines) should at least get our fair market share, which is 50 per cent,” Mr Tewolde said. Today, 46 out of Ethiopian’s 76 international destinations are in Africa.

By opening different hubs in Africa, Ethiopian is now working to increase the market share of African airlines, including by snapping up smaller rivals.

In 2010 the Addis Ababa-based carrier acquired 40 per cent of ASKY Airlines of Togo, followed by a 49 per cent stake in Malawi Air.

Passenger numbers are up

ASKY, currently plying 12 destinations in its region and transporting 500,000 people yearly is expected to turn in a profit next year, while Malawi Air is under formation.

In addition, Ethiopian is also negotiating the opening of another hub in central Africa, according to Mr Tewolde, who noted that the airline is also currently supporting Cameroonian and Cape Verde airlines.

Following TWA’s model, Ethiopian is also training pilots and technicians from different African countries. Its aviation academy now accepts 1,000 students annually, with plans to expand this to 4,000 every year.

The airline is also set to open a four-star hotel in the capital, a walking distance from its Bole International Airport hub.

Its revising its Vision 2015 to introduce seven profit centres, it hopes to increase its current $1.9 billion annual revenue to $10 billion by 2025.

These centres are Ethiopian cargo, Ethiopian aviation academy, Ethiopian maintenance and overhaul, Ethiopian international passenger, Ethiopian domestic and regional passenger, Ethiopian In-Flight Catering and Ethiopian Ground Services.

In today’s globalisation era, Ethiopian Airlines, a child of the Cold War, now flies to 194 countries, picking up several aviation awards, while its parent TWA airline was sold and merged with American Airlines a decade ago.

Opportunities abound.

This analysis was filed by Andualem Sisay based in Addis Ababa for the Nation Media Group.

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