FROM MAGAZINE: Ethiopia the bright spot in African aviation

At a time when most African airlines are struggling with collapse in commodities and political instability, Ethiopian Airlines has stayed rock steady with an aggressive growth strategy in mind. The airline has strengthened its presence by expanding, in terms of network, capacity as well as equity participation and strategic partnerships in other African airlines, Shreya Bhattacharya reports.

At the recently held AFRAA (African Airline Association) Annual General Assembly in Rabat, Morocco, Alexandre de Juniac, director general & CEO of IATA marked that too many African governments view aviation as a luxury rather than a necessity and this perception needs to change. “The value of aviation for governments is not in the tax receipts that can be squeezed from it. It is in the economic growth and job creation that aviation supports,” he said.

It seems Ethiopia, understands the importance of this statement quite well. The country with its state-owned profit making carrier, an expanding airport and an aggressive aviation growth strategy, stands as the only exception to Africa’s current position of the weakest airline region in the world over the past four years.

While other African airlines are struggling with poor finances, Ethiopia’s flag carrier’s net profit in the 2017/18 financial year rose to $233 million from $229 million, the previous year. Its operating revenue rose by 43 percent to $3.7 billion in the 2017/18 financial year. Maintaining its momentum, the airline, in 2018 launched quite a few new services on various routes to etch its name as the fastest growing airline of the continent. Moscow, Manchester, Los Angeles are some of the destinations for where it launched services in December itself.

An idea of this Addis Ababa-based airline’s rapid expansion can be realised by taking a stock of its expanding fleet. In 2010, when Ethiopian had, for the first time, unveiled its 15-year expansion strategy, it wouldn’t have guessed it would outperform its own expectations. Intending to grow its business and compete with other regional players, the airline had strategised to expand its fleet to include 100 aircraft till 2025. However, by 2018 it already had over 100 aircraft flying across various destinations. This has forced Ethiopian to revise its target to include 150 aircraft by 2025 to keep up with its aggressive network expansion pace.

Addis Ababa Bole International Airport

Currently, the airline has a total operating fleet of 108 aircraft while 65 aircraft are on order. The aircraft on order include 15 Airbus A350-900XWB, 5 Boeing B787-900, 10 Q400 Bombardier. Apart from these long range passenger fleets, the airline has also placed orders for 29 Boeing B737 MAX 8s for its medium range passenger services.

With its expanding fleet, the airline already flies to around 20 locations within the country, 60 destinations in Africa, and more than 100 cities in major regions including Europe, Middle East, Asia, Africa and North America.

A major explanation extended by experts for Ethiopian’s exponential growth is the support it gets from its benevolent owner, who does not demand dividends and lets it use the profits for furthering its betterment. Apart from it, the state policies have also helped keep down labour and financing costs. A recent industry report by travel trends expert ForwardKeys says that in recent years, Ethiopia has emerged as a destination and a transfer hub for long-haul travel to Sub-Saharan Africa. As per the data, Addis Ababa has grown its volume of international transfer passengers to Sub-Saharan Africa, five years in a row (2013-17).

These figures have further got a push when a new regime came in place in the East African country. Since coming to power as Ethiopian prime minister, following the surprise resignation of predecessor, Haile Mmariam Dessalegn, Abiy Ahmed has accelerated a radical reform programme. Apart from reshuffling his cabinet, lifting bans on websites and other media, reaching out to hostile neighbours and rivals, he has also brought changes in visa policies bringing leniency to encourage more visitors. The industry report notes that at least some of Ethiopia’s increase in international flight bookings is being attributed to the new-found confidence in wake of reforms carried out by Ahmed since he took office in April, 2018. These include signing a peace deal with Eritrea in July, a new e-visa policy introduced in June, which allows all international visitors to apply for a visa online and a promise to open Ethiopia’s markets to private investment.

Source: ForwardKeys

International bookings for Ethiopia, for the period from November 2018 to January 2019, are ahead by more than 40 percent against the same period in 2017 – well ahead of all other destinations in Sub-Saharan Africa.

Furthermore, the cargo is also a strategic business unit and has been contributing to the under the Ethiopian Airlines’ ambitious strategic road map. In fact, the carrier was one of the first in Africa to understand the benefits of generating revenue from both cargo and passenger operations. Tewolde GebreMariam, the CEO of Ethiopian Airlines informs that the airline targets to augment its tonnage to over 820,000 per annum flying to 42 freighter destinations across 5 continents using 19 dedicated cargo aircraft.

The freight division, Ethiopian Cargo, serves over 40 global freighter destinations with 8 dedicated freighters including 6 Boeing B777-200LRF and 2 Boeing B757-260F from its main hub in Addis Ababa and Liege. Ethiopian operates in major trade lanes between Africa and Europe, Middle-east and Asia. Apart from this, the group has placed orders for 4 Boeing B777- 200LRF and 2 Boeing 737-800F.

Today, much of Ethiopian’s cargo growth is being driven by the country’s booming perishables export market, including time and temperature sensitive goods as flowers, fruits, meat and vegetables. As the country prepares to scale up its perishable exports, GebreMariam places bet on the airline’s cargo capabilities.

Ethiopian Airlines’ cargo terminal at the Addis Ababa Bole International Airport, which is built on a 150,000 square metre plot. The terminal, inaugurated in 2017, has the capacity to handle 600,000 tonnes of cargo per annum.

“Currently, Ethiopian Cargo & Logistics Services operates a warehouse with over 250,000 tonnes annual capacity, equipped with modern cooling facilities. To complement our continent’s growing economy with an efficient cargo movement, huge investments worth of 107 million Euro is underway to build modern and high capacity cargo terminals. Once completed, it will have a capacity of 1.2 million tonnes per annum and it will be the largest trans-shipment terminal in Africa. Of course, this is a capacity comparable to cargo terminals at Amsterdam Schiphol, Singapore Changi, Hong Kong, or Dubai,” he says.

GebreMariam further adds, “At Ethiopian, use of latest information systems is not an afterthought; hence we are automating the entire cargo business process with one of the best Cargo IT systems (Cargo Spot, Champ) with the aim of providing efficient air cargo services within, to and from Africa. Our cargo services is using latest technologies for data, information and market intelligence with 100 percent e-AWB from its main hub in Addis Ababa and recorded 60.8 percent international e-AWB penetration while industry average is only 48.9 percent per IATA e-AWB penetration report of December 2016. This move is part and parcel of the airline’s entire effort towards becoming a paperless industry by adopting the latest aviation systems and technologies.”

To compliment Ethiopian’s rapid growth while it spreads its wing, another entity which is proliferating is Addis Ababa’s Bole International Airport. The airport, which is also the main hub of Ethiopian Airlines, has overtaken Dubai as the leading gateway to the region in last few years and is now poised to take over as the largest airport in Africa upon its commissioning in January 2019.

The airport, earlier in September 2018, started its new passenger terminal to ease congestion. The current terminal was built to accommodate five million passengers annually. This passenger terminal is further part of an expansion project, the completion of which will allow it to accommodate 20 million passengers a year.

In 2017, Ethiopian Airlines Group and the Ethiopian Airports Enterprise (EAE) merged to form the Aviation Holding Group. The group’s power in the African market is already a force to be reckoned internationally.

Furthermore, Ethiopian is also making its presence felt by acquiring stakes in other airlines- a strategy aimed at gaining a competitive advantage against rivals such as those in the Gulf. The airline first helped launch ASKY Airlines in the West African country of Togo and then acquired a 49 percent stake in Malawi’s flag carrier in southern Africa in 2013. In 2018, it launched an airline in Mozambique, relaunched Zambia’s flag carrier, established a new airline in Chad to cover West and Central Africa and resumed flights to Somalia after a 41-year hiatus. It also has interests in Djibouti, Equatorial Guinea, and Guinea airlines.

While Ethiopia's aviation sector, as a whole, is bringing all necessary changes in its policies and infrastructure to maintain the growth momentum, it will be important to see how in the coming days, some of the global and regional occurrences like the fuel pricing or the opening of skies in the African continent affects the East African countries’ ambitious aviation experiments.