Ethiopian airlines: A hub in every region

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Addis Ababa, 19 May 2014 (WIC) - The managers of Ethiopian Airlines have an ambitious expansion plan to be implemented by 2025 that involves more training and new infrastructure.

Ethiopian Airlines is one of the leading state-owned companies in the country.

As with the Agricultural Transformation Agency, the government has chosen to prioritise professional staff rather than allow political appointees. For Henok Teferra Shawl, the vice-president for strategy and alliances, the key has been discipline.

Africa is a huge continent. So one hub serving the continent from Addis Ababa, we felt was not enough "They know that this is a company and that it has to be operated on commercial considerations. This is a very tough business, the airline business, as you know. There's very little margin for error.

"The competition is global, and it's fierce. It's uneven because, as you may well know, there are those who are endowed with much more capital and access to cheaper fuel."

Developmental states come with their own challenges, particularly in the governance of parastatals that are used to drive development. Opportunities for rent-seeking abound, especially when the para-statal operates as a monopoly.

As a result, there are no free tickets for civil servants or other favors of the kind that took down Air Afrique, which was managed by West African governments.

Ethiopian's profits in the year 2012/2013 were $110m, all of which was re-invested in the company.

But the airline remains a strategic tool for the government, for both horticultural exports – mostly flowers – and also to bring in tourists and investors. It opened a new route to Shanghai in late March, bringing the number of flights to China to 28 each week.

Expansion

Ethiopian is also starting to map out the contours of Africa's airline sector over the next few decades, both to stay profitable and also take part in the regional growth story.

"One of the pillars of that road map is what we call multiple hubbing," says Henok.

"Africa is a huge continent. So one hub serving the continent from Addis Ababa, we felt was not enough ... that we needed multiple hubs in the various regions of Africa," he explains.

Hence, the creation of a West African partner, ASKY – established with the help of West African banks and private investors in 2010 – and the purchase of a 49% stake in Malawian Airlines in 2013.

"And a fourth hub will be established in the Central Africa region. We're hoping it will be in the DRC [Democratic Republic of Congo], but that's still ongoing," he adds.

The business plan for Ethiopian Airlines includes the expansion of its current activities and the addition of new business units, some for training and maintenance.

The company has invested more than $50m in the Ethiopian Aviation Academy during the last two years, with the purchase of flight simulators.

The institution has grown its student body from 200 to 1,000 trainees, including pilots, technicians, cabin crew and marketing and finance personnel.

"And, going forward, we aim to invest even more to enable it to have a 4,000 annual intake capacity by 2025, the aim being half of the students being non-Ethiopian Airlines and especially African students because there is a huge demand for aviation skills training in Africa," says Henok.

A major cargo operator, Ethiopian is investing in new cargo planes. The airline covers 48 cargo routes, with six dedicated aircraft.

"By 2025, we'll have at least 18 aircraft," says Henok, who points to the additional infrastructure work being done.

"We are building one of the biggest cargo terminals in the world, with a 1.2m tn annual capacity – 600,000tn in the first phase, 600,000tn in the second phase.

It has both dry and perishable storage facilities and, when finished, the perishable facility cold storage will be one of the biggest in the world, even bigger than the Schiphol Amsterdam airport facility." (the Africa report)

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