Ethiopian airlines taking the lead

Ethiopian Airlines – taking the lead

In no other Continent it has been so hard to strive for success on the airline business. In Africa, flag carriers have come and gone, dreamed big and failed despite protectionism from its succeeding governments. In a rich Continent with a turbulent story, one as emerged and claimed for itself the role of leading airline in Africa. Ethiopian Airlines 70 years of aviation knowledge and the already successful “Vision 2025” master plan, have putten the African country on the aviation spotlight.

The World Bank, on its latest “Global Economic Prospects” edition, forecast that Ethiopia will be the fastest growing economy in 2017. GDP is forecast to grow 8.3%, well above the world averange of 2.7%. 2 other East African nations also rank on the top 10 list: Tanzania (+7.2%) and Djibuti (+7%). It's neighbouring Kenya has a 4.7% growth forecast for 2017 while South Africa will have a modest 1%.

Ethiopian Airlines is, and has always been a 100% government owned airline. However it's worth noticing that it is managed on an independent way, but with the benefits of state protection. Let's take the CEO role as a comparison. Mr.Gebremariam has been working on the airline for more then 30 years and since 2011 has been appointed as CEO. On the other hand, South African Airways, former leader African airline in terms of capacity and also government owned, keeps “welcoming” new CEO after CEO's, on a clear sign of promiscuity between state and airline affairs. This is well demonstrated by the appointment of Duduzile Myeni who was also the chairmen of the Zumba foundation. The Addis Ababa based carrier can be more easily identified with the 3 major Gulf carriers, on what is today in terms of management and its role as a key player in the region, then with the legacy African counterparts.

Its ambitious plans are unrivalled by other airlines in Africa and under guidance, and adherence, to the “Vision 2025” plan, the airline has seen amazing growth. You can't just expect to carry the most passengers without having solid foundations, covering several areas of the aviation industry. And for Ethiopian the foundation of it's growth is do it all in house. It's newly inaugurated cargo terminal at Addis Ababa has a 600.000t of annual

capacity and is capable of accommodating 7 aircrafts at one time. They are also building the largest catering facility in the Continent while expanding it's MRO facilities and training academy. According to official information from February, the Ethiopian Aviation Academy plans to welcome 4000 students a year.

Of course the core business of the airline is the passenger segment and in that regard the expansion has been tremendous. With 80 passenger aircraft (and orders for 43 more), with an average age of bellow 5 years, flying to 116 destinations that stretch from São Paulo to Tokyo, Oslo to Johannesburg, Ethiopian Airlines has been enjoying an average double digit growth of 25% per annum. And that has been for the last 10 years! On its most recent financial report, 2015/2016, a 20% passenger growth was registered. To put in perspective, its RPK (Revenue Passenger Kilometre) was 20%, which is 12% more then what IATA recorded for Africa and 13.5% then for the whole world.

Africa and China trade relations have been growing in recent decades, with the Asia country now assuming the role of being Africa's biggest trade partner (in 2015 this value was around 300 billion USD). In Ethiopia, not only China has sponsored their soon to be open railway line to Djibuti but also the Bole airport terminal expansion which will allow for Ethiopian Airlines further growth. However such growth is forecast to reach is maximum capacity in just 10 years. So a long term solution is already on the horizon – a new airport.

The Ethiopian government has ended a study to build a new airport with a potential capacity of 120 million passengers per year and China will be sure to get its hands on this lucrative project. The two economically growing economies seem to have found each other as suitable partners, and so, naturally, Ethiopian Airlines as “discovered” China.

70% of Bole passengers are in transit and it's eastern location on the Continent suits well inbound Chinese passengers travelling further to Africa or even to reach South America.

Analysing data on the airlines reservation system (28 Ago – 03 Sep), Ethiopian Airlines flies to 4 destination in China: Beijing, Shanghai, Guangzhou. and Chengdu. That totals 24 weekly flights with a total capacity of 8286 seats. Kenya Airways has a daily flight to Guangzhou (with a stop in Bangkok or Hanoi depending on the day). It's weekly capacity is at 1638 which is about 20% of what its neighbouring airline is offering. Egyptair is another airline offering flights to China. It operates 3 weekly flights to Beijing and daily to Guanzhou, representing 3234 seats. South African Airways has withdraw from the Chinese market in 2015. On the same page it is also worth noticing that for a 6 month period Air China did had flights to Addis Ababa. Instead, nowadays the airline, plus Shenzhen Airlines, code share with Ethiopian Airlines strengthening connectivity between China and Africa. All of them are Star Alliance partners.

Ethiopian Airlines has stand out from its African counterparts by bringing connectivity to the Continent, through supported economic growth and stability from its Government. The airline recent history can probably relate best to the huge growth of Turkish Airlines, who defied Europe's legacy airlines from one side and the 3 big Middle East airlines on the other side. For both airlines, geography is key on their connecting network, and growth has paved the way for building new airports. Ethiopian fleet will continue to grow, joining an already young one, and that will give it a lower cost per seat.

Boeing released last month its global forecast for the next 20 years, stating that by 2036, the fleet composition of African airlines will double. Africa is the worlds biggest untapped aviation market and air travel throughout the Continent has a long history of being unaffordable for many. However rising economies are changing this scenario giving a new boost to air travel. And Ethiopian is now on the lead. It has became what no other African airlines has been – a truly global airline!

Rui Miguel