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Further enabling Africa's economic growth

Article - June 1, 2012
A Star Alliance member since 2011, Ethiopian Airlines – the African Airline of the Year 2011/2012 – is a profitable and ambitious airline that is further carving out a role as a hub provider for the continent and is increasing its connections with Germany

Sitting on the edge of Addis Ababa is Bole International Airport, home to Ethiopian Airlines. The airport is the third busiest in Africa, handling 3.7 million passengers in 2010. It has recently started operation of a 4725-metre runway, capable of receiving all passenger craft including the Airbus A380. Ethiopian Airlines transports passengers to 17 domestic locations and 66 internationally. Wholly owned by the government, but operated independently, it is considered one of the most important elements in ensuring the continued economic expansion of Ethiopia and Africa as a whole.

“Ethiopian Airlines was first established 65 years ago, and since that time they have been promoting Ethiopian culture and commodities all over the world. Today, in terms of attracting tourists, Ethiopian Airlines has played a vital role,” says His Excellency Deriba Kuma, Minister of Transport.

African airlines possess only 20% of the market share for flights within their own continent, competition within the industry being fierce. This is something the Minister wishes to change and he regards Ethiopian Airlines and its hub airport as the entities that can achieve this. Regarding Ethiopia's position within Africa, he explains that: “Bole International Airport has a strategic advantage to become transit hub for international and African passengers.... It has started investing in airport infrastructure and facilities such as advanced radar technologies, highly sophisticated aircraft take off and landing equipment has been constructed.”

Ethiopian Airlines is a company that is held in high regard in Africa. Set up in 1946, its expansion mirrored the growing independence of African nations. Tewolde Gebremariam, CEO of Ethiopian Airlines explains that “the major revolution came back in the 1960s when most of the African countries where getting their independence and Ethiopia was in the forefront of establishing African unity.” In the ‘60s they were the first African airline to bring jet carriers to the continent and were the second carrier to use the Boeing 767. This August, Ethiopian Airlines becomes the first African carrier to operate Boeing's new 787 Dreamliner. Since 2009, it has thrice been awarded Gold at the African Airline of the Year Awards organised by the African Aviation News Portal.
Mr Gebremariam further highlights Ethiopia's competitive potential as a Central African hub: “Because of the strategies that we have been following, Addis is one of the main hubs in the continent. South Africa, Nairobi, and then Addis Ababa and Cairo are the major hubs used as a gateway entry to the continent. Geographically we are in the centre and it is a strategic advantage for us to serve as a gateway to the rest of the continent.”

Mr Gebremariam’s airline serves 42 destinations in the rest of Africa. He continues: “They are mostly connected every single day with the rest of the world meaning Addis Ababa has emerged as one of the leading hubs for the continent and our vision going forward is to build on that.”

For example, a recent Ethiopian-German accord has enabled Ethiopian to fly to four German cities with seven flights a week to each destination.

Their 'Vision 2025' corporate strategy follows on from the highly successful 'Vision 2010'. In 2004/2005 the business model of Ethiopian Airlines was reviewed and 'Vision 2010' aimed for the airline to be a billion dollar company in terms of annual revenue by 2010. Mr Gebremariam proudly reports that: “We had passed that actually by June 2010, our revenue reached $1.3 it was a very successful roadmap”.

‘Vision 2025' is a 15-year roadmap, “because we realised that fleet renewal takes a long time because you have to deal with the manufacturers, financing, so it takes ten to 15 years,” says Mr Gebremariam. The key ambitions of this blueprint are to grow the company to be an aviation group worth $10 billion, operating 128 planes to more than 90 destinations, carrying more than 80 million passengers and having more than 17,000 employees.

“This is a huge milestone from where we are from 48 airplanes today we are aiming to make it 128 airplanes, close to three times the present number.”

He continues: “Ethiopian Airlines has been there to play a pivotal role in most of the continent’s development. For all the African countries to develop, connectivity and mobility are essential.”

Success at the airline has been down to a few key factors he tells us: “I would say the fundamental reason is the employees’ dedication and devotion to the airline - the employees are not just working for a pay check – as well as very prudent management, very sound in terms of cost management, and a very wise vision from the government.”

The company is 100% government owned but is allowed to operate as a private enterprise. A government board gives guidance but does not interfere in the day-to-day activities of the airline. “The business autonomy has been very helpful, unlike other African country’s governments where you have a lot of interference...the Government also treats the airline as a strategic asset not as a simple business organisation but a very long term vision with a strategic mind set.”

Becoming a member of the Star Alliance airline partnership in 2011 has been one of the company's key moments. “Ethiopian Airlines is also adding value to the Star Alliance network because if you see Star Alliance they have Egypt Air in the north, South African Airways in the south but in the middle it is a white spot,” comments Mr Gebremariam.

This is the benefit that Ethiopian Airlines offers to Star Alliance; the three key benefits for the airline itself are the revenue feed from the Star Alliance network and the coverage it offers to Australia and South America; reductions in overheads resulting from shared facilities with other alliance members; and, perhaps most importantly, the benefits to the brand awareness of an airline that does not yet possess a high profile elsewhere in the world.

Mr Gebremariam sees the key achievement of his company as its self-sufficiency in a complex and difficult business arena: “In a very challenging operating environment, with very challenging operating economics, against all these odds you see Ethiopian Airlines growing, making profits, financing its growth itself. All our finances are self-generated meaning we borrow money but we pay back with interest. The industry respects us for our reliable business partnership whether licensers, manufacturers or financers.”

He sums up the key customer appeal of the airline he heads as its enabling role for engagement with one of the world's most fascinating and promising continents: “You can board an Ethiopian Airlines flight in Frankfurt and you are ready to do your business in Tanzania or Uganda the next morning.”