Tewelde Gebremariiam speaks Ethiopian success

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Despite being a source of pride for many within and outside Ethiopian Airlines, beneath the rosy picture lays tension. Many of its staff, from pilots to cabin crew and ground technicians, as well as support teams, continue to complain that they are “overworked and underpaid”. The management, under the stewardship of Tewelde Weldemariam, chief executive officer (CEO) for over four years now, has been criticised for being stubborn, disregarding and dismissive of its employees’ plights.

Many say they do not like his management style, which borders on micromanagement. He is blamed for creating an “exclusive club” within the top tier of management, excluding experienced workers who have served for decades. His alleged obsession with the company and sense of insecurity of failure makes others feel rejected and unwanted. Many see in him a person who has risen to power only to act in impunity. Tewelde does not like those who challenge and criticise him and this has resulted in alleged harsh retaliation.

His management is also under fire for its alleged failings in navigating through the phenomenal growth the airline is experiencing, thus exposing it it to deteriorations in passenger safety and quality of services.

Tewelde, a man who grew up in the airline since completing high school, believes he is not in a popularity contest; he has a mission to accomplish. Questioning the accuracy and motives of the sources these allegations and criticisms come from, he argues employees are all that matter to him, while he would like to see himself judged rather by the numbers the company has recorded since his rise to the helm. Indeed, the numbers are very impressive. Ethiopian Airlines actually has a higher credit rating, in the eyes of international financiers, than the country that owns it, according to an observer.

Ethiopia’s national flag carrier has grown spectacularly over the past 10 years, more so than the first 60 years of its history. Ethiopian Airlines is now an international company with 2.3 billion dollars in revenue, of which 228 million dollars was recorded as a profit during 2013. Such a feat is achieved on a continent lacking infrastructure and common aviation policy, while its governments impose heavy tax on the industry and favour non-African airlines over indigenous ones.

Flying to over 80 destinations across the world, with a fleet of more than 60 aircrafts, Ethiopian is today the 37th largest airline in the world in terms of revenue, and 18th biggest in terms of profit, according to the IATA, an industry association. No doubt, for a company that hails from one of the poorest nations on earth, these results are unmatched by any domestic company, while highly competitive in the global market. Under his watch, Ethiopian has joined the Star Alliance – a network of 28 airlines reaching 1269 airports in 190 countries, and membership to which requires meeting international standards.

Surpassing its own ambitions in Vision 2010, the Ethiopian Airlines management is now more ambitious in making the airline a 10 billion dollar company in little over a decade, flying 18 million passengers with 120 aircrafts from and to 90 destinations; and providing jobs for 17,000 people – more than double its size today.

In a frank and candid interview Tewelde has with Tamrat G. Giorgis, managing editor, he attributes these accomplishments to the hard work and dedication he describes as exceptional in Ethiopian’s 7,000 employees. Excerpts:

Fortune: Obviously Ethiopian Airlines is a growing company. It’s been growing quit a often exceeding its own expectation. What is your reflection on this and to what extent do you owe to this accomplishment?

Tewelde: It is not easy to grow at this pace, especially in an industry where most airlines find it very difficult even to survive, let alone grow. Had it not been for the exceptional commitment, dedication and alignment of personal vision of all employees within the company, this would not have been conceivable. It is very common to find Ethiopian Airline’s employees working long hours and not giving up on the task before they finish, no matter what the circumstances are.

Q: Quite often you describe your job as exciting. What part do you find the most exciting?

The challenge! You wake up in the morning, turn on your computer and get lots of emails and news; some of them good and some of them very challenging. New developments are so frequent in a day; you may wake up in the morning to find oil prices are moving from 107 dollars to 115 dollars a barrel, which is a big deal for the industry.

We are operating in a very difficult environment; an African environment. We are 100pc owned by the government, which many see as a problem for an airline; and there comes no capital injection, for, we finance our own.

Q: Although you do not pay tax.

That is a bit complicated. Then there are opportunities, which also make you look forward with optimism.

Q: Do you have targets in Vision 2025 within sight?

In fact, it will be revised. Next year will be the fifth year of the Vision 2025, where four years have already gone by. In all the parameters under Vision 2025, there are annual targets for five years, hence it is divided into three phases. We find ourselves exceeding all the targets that we put into place for the first phase under Vision 2025. For instance, the number of airplanes for the year that we have now was planned to be 58, but we in fact have 67. Revenues were targeted at around two billion dollars, which has already been exceeded. Destinations under the entire plan were 90, but we are already flying to 82 destinations.

Q: Do you see yourself as a man who can take the Airline to achieve these goals in 2025?

I wish, and yes, of course.

Q: What sort of management philosophy have you been following so far?

I believe in growth. Despite this though, at the end of the day, when we compare ourselves with our competitors, all of us in Africa – South African Airways, Kenyan Air, Ethiopian Airlines, Egypt Air, Air Morocco and TAAG Angola – have only 20pc of the market. The large part is controlled by non-African carriers. We have to grow to be able to compete because, in this industry, unfortunately, economy of scale is the fundamental success factor. We need a higher volume of activity to reduce unit cost and the only way we can compete and reduce our unit cost, especially with our strategy of cost leadership, is to grow.

There is also an external opportunity in the market, which enables us grow. We are located in a region whereby the economies are growing faster than the world average. Hence, we do things right at the right time and there is a tremendous opportunity for growth.

Growth is not going to come so easily, though. It has challenges, because in order to grow we have to stretch our resources and develop internal capacity. The pace of growth of internal capacity and the demand may not always match, whereby there remains some gaps.

Q: It is one thing to grow as we see you growing, but another thing to manage growth. Are you comfortable in properly managing this growth?

I am reasonably comfortable. We have to make sure that there is sufficient foundation for the growth and that, by and large, is internal capacity. It is either on the human resources or on the finance side. Of course, a combination of both is what you have in infrastructure and technology. Yes, we are managing our growth in all aspects; we are making sure that there is enough internal resource to manage the growth and there is enough demand in the market to enable us to engage our resources in a profitable and efficient manner.

Q: There are common narratives of growth and expansion in all that we have discussed. Yet, there are undercurrent tensions, where both your passengers and employees are getting very much frustrated with you. I have two reviews done by an online employment agency, which reviews perceptions by employees towards a particular company and another carried out by SkyTrack, a respected and well acknowledged site for passenger reviews of an airline. I see a great deal of frustration.

I would not call it frustration. There could be concerns, and genuine concerns. We have customers, employees and the shareholders as stakeholders, who we have to make sure are reasonably satisfied with the company.

The shareholder, or the owner, is happy because the company is growing with its market valuation. As a state-owned airline, it is also a policy instrument for the government for bigger objectives, such as economic development, whether it is in the horticultural sector or tourism.

Connectivity is essential for development and if you want to fly to any part of the world from Addis today, you will have no problem with an airline of this size and with such a network as ours. In addition to generating hard currency for the country, we help it to save. If you want to fly to Washington DC, you pay us in Birr, while other airlines repatriate the money you pay them in Birr from the national bank.

Our passengers have choice in terms of network and airplanes with modern technology, flight amenity features and connectivity. Our network is the best today in terms of connectivity and shorter time laps for those who want to travel from West Africa to China. You fly from West Africa to Addis in a couple of hours and you connect to China and 28 destinations and four gateways. The same is true with others; we have nine destinations in Europe, a couple of destinations in North America, and Brazil.

Passengers are getting convenience, more choice and better connectivity, which is coupled with the Star Alliance network. That is why we are increasing passenger numbers between 20pc or 30pc year on year. Their satisfaction is expressed with the fact that they are flying with us in large numbers. We always collect feedback through comment cards, which we take seriously. As it stands, 87pc of our passengers are satisfied with us, according to the survey that we collected from our flights.

I also follow all the comments on SkyTrack, every week. Sky Track gave us an award last July.

Q: Three star!?

It is in the category of best airline staff and service in Africa. Those bad comments would have been valid, if we were losing our market share and passengers were deserting us. I would say you are right but you are not, because the numbers are not proving or supporting this sense of frustration.

Come to our employees. Most airlines are actually laying employees off. To the contrary, we are increasing the number of employees every year, growing by a thousand. The target for next year is 1,341, to be exact. We are creating more jobs in the country, directly and indirectly, where the aviation industry just around Bole [International Airport] and in Addis is about 20,000.

If you see in the last few years, there has not been a year whereby we have not tried to address employees’ compensation issue in terms of salary increases. There is a clause in our collective agreement which says that if the company remains profitable, there ought to be an increase in salary of between six to eight percent.

You are a journalist and can go to the database and see what kind of increases in Europe, America or in the rest of the world airlines and employees are fighting for, which is from three percent to five percent. This all shows how much the Airline is focusing on its employees.

In terms of productivity, we have a long way to go in terms of revenue per employee or number of employees per aircraft. Although we have made tremendous improvements, in terms of best practices, we have not reached there yet.

Q: From what I gathered, the owner has a serious concern on good governance within the company. I have one example of the comments of many employees who actually said that it is not a company good to work for because of the management’s stubbornness, in that it does not listen or understand. I sampled 40 comments, where more than 50pc of them have bitterly complained about the quality of your services. A guy who flew on February 17th from India said that, “It is time for Star Alliance to step in and fix some of the basic norms with Ethiopian Airlines”. Don’t you think these are undercurrents and major problems that need your attention despite the rosy picture that the management tries to portray about the company?

If you ask 40 employees out of 8,000, will they be a good representative?

I leave that to you. Not all of our employees will be happy with the changes we are introducing. Here is an Airline with 12 or 14 aeroplanes, flying to about 20 or 30 destinations, serving two or three times a week, and which had a very laid back work culture in the past. This Airline is on the global stage now, competing with the best in the world.

There is demand for productivity, which requires us to bring a global standard and hence changes. Those changes may not please everybody. But the measurement is if the changes address the objectives and the majority of the employees are satisfied, we will go with them.

I am not saying every passenger is fully satisfied, but 87pc of them are with the feedback we have. I read the comment you mentioned; somewhere the service might not have been up to his expectation and he has all the right to say what he has said.

We may have failed in that particular case. But that is not representative of the standard of services that we offer. If we are going to measure our services, it has to be a representative sample of six million passengers.

Q: Let me come to the same point but in a different way. I hear you say quite often that you believe in your staff; that they are the most crucial element in your operations in an environment you describe as “hostile”. But you seem to be at loggerheads with a significant number of them because we see there is an influx of people from the company. Many people are leaving the company.

That is not true.

Q: You just stopped pilots who were travelling overseas a few months ago.

No.

Q: Didn’t you stop three pilots from leaving the country through the immigration?

No. We have to confine our discussion to facts.

What is staff turnover in the industry; and that of the Ethiopian Airlines?

In an industry where there is 10pc staff turnover, for Ethiopian it is between two and three percent.
Can we say that there is an influx of people leaving the company?

Q: Then why does the management use coercion to get its way with employees?

It is not coercion. This is the only place in the world where you will be picked up for the process of recruitment and given a free scholarship worth about two million Birr to be trained as a pilot or technician. There is no free lunch in any part of the world. You will have some obligations.

Q: Don’t you think it was appropriate to use the due process of law than resorting to executive instruments and infringing on individual rights?

Of course, there is due process; we have sued them in court.

Q: But without having court warrants, you stopped them from flying.

You will have to get your facts right. We didn’t stop them from leaving the country; they fly every day.

Q: I am sure that you are aware that two or three pilots were stopped from leaving the country a while back? One was leaving for vacation, while another was actually assigned to bring back a B787.

That we have discussed with the gentlemen. It was some name mistake or some other issue  . . .  and we have cleared it out immediately.

Q: But I gathered they do not seem convinced by the explanation.

But we have discussed it face to face and we have agreed.

Q: Are you telling me that you had no hand in the episodes where your employees were stopped at immigration from leaving the country?

They were previous employees who have defaulted on their loans and training agreement. This is a company which trains people free of charge with an obligation that those people have to serve the company for a certain period of time. There should be no way a poor farmer in Ethiopian subsidises a rich gulf carrier in the Middle East.

Q: What do you think is the best way of handling this situation?

The company has to be competitive and it is. But again, in this globalised world, talent migration is unavoidable. In fact, in the industry, we call it the “Third World War”. Today, you will find a lot of Spaniards find jobs in Angola, Brazil or Mozambique, which was not the case before. A lot of western talent is moving east and a lot of eastern talent to the west. We have pilots coming from the Gulf and we are hiring them; in the process, there is a reasonable level of migration you cannot stop. A loan and training agreement is not unique here; a pilot has to deposit 50,000 dollars to get hired at Singapore Airlines.

Q: Why are Ethiopians trained by an Ethiopian company which invests a substantial amount of money in them wanting to leave? What is driving them away?

A lot of reasons; better payment is one. But, if the level of turnover or the percentage of turnover is exceeding the industry average or shows a significant increase, then we have to be concerned.

Q: Don’t you think that good governance is a major factor, because some of them are claiming they are overworked and underappreciated?

Underappreciated? I will show you a letter that I wrote yesterday thanking everybody – all the staff – for making Ethiopian Airlines the largest airline in the world. And this is not the first one; it has been done several times.

There are meetings where we appreciate and share concerns. Where people work together in an environment of a fast growing company, there will be concerns.

The fundamental questions should be whether we exchange and address those concerns. There are monthly meetings, and it is within the right of employees to ask questions or raise issues.

Q: Many of your employees are terrified of you, because they think that you are stubborn and not willing to listen to them. You are forceful, no doubt about it. But, your force is seen as a negative one that rather polarises people within the company.

You are an outsider; and I live in this company. You can call several people, most of who we grew up together with right from the beginning at Addis Abeba Airport and call each other with first names, and ask them.

Do you know that I am not referred to here as “Ato Tewolde”?

Everybody calls me Tewolde. What does that show to you? It is proximity, closeness and friendship. I can bring to you, randomly, any number of people and they will tell you that. To tell you the truth, there are a few people – very few in each department – who have found it a very difficult to change. They have paused in the 1990s and they are stuck finding it challenging to move with the changes.

With those people, we have to discuss, trying to bring them up to speed and the requirements of today’s challenging business environment. But at the end of the day, if it does not work, an amicable separation is in order.

Some of them that you have mentioned have left the company, but they remain here and there to say a lot of things.

But how many are they?

Very few; you cannot even quantify them as a percentage.

Q: I am asking this question with the risk of being presumptuous. I was wondering about the source of your unpopularity within the company, and it could be perhaps that you are a bad person or it could be because you are the kind of manager who is trying to push people to the edge so that they become more productive. It all depends on your philosophy. What kind of manager do you see in yourself?

I do not believe management is all about popularity. As a good manager or leader, you just have to be right. Sometimes you may not be popular, but being right is always trying to keep the balance between stockholders; your employees, your customers, the owner and the community at large.

In doing so, you will have changes, because it is a very dynamic environment. So dynamic to the extent that our annual plan we formulated today completely changes a couple of months down the line.

Productivity is not only about the function of the worker. It is the function of worker motivation, a system of having the right tools at the right time and the right resources and the right leadership. We have to bring these factors together in order to move our productivity level forwards. If a staff member at Emirates is doing a particular task and we need three people to perform that same task, our productivity is a problem.

In every meeting that I chair, we have an open discussion. People are free to talk whatever they feel and they tell me things. We discuss issues, whether they convince me or I convince them.

Q: You are often accused of retaliating to people whose comments you do not like.

No! We may not agree on an issue, but in fact the dominant opinion here is that I forget everything the next morning. This, you can again ask any number of people and they will tell you.

Q: Then where does the perception that you are a very authoritative and stubborn micro manager come from?

I do not have that perception. Again, your sources are a very limited number of people whose comfort zones have been affected by the changes, and who do not like to go with them. If your sources are those people, then we are not on the same page. If your sources are the majority – 90pc and more of the 8,000 people – then we can discuss.

Q: Do you acknowledge that you have a good governance issue within the company?

By and large there is good governance, while here and there are isolated problems, especially in a lower level management. The company has a very strong system of redressing issues, whereby, for instance, disciplinary measures are always reviewed by what we call grievance committees.

If you are an employee at Ethiopian Airlines, you somehow have an issue with your boss and you could not resolve it directly, then there is a procedure for grievances, from first to third stages. Grievances are reviewed by a panel of neutral people who are not directly related to the case.

This on its own is a very good governance system, which gives everyone the right to be heard and a case is addressed by an independent committee. For any serious offences, termination is due, a staff member is suspended and an independent body of grievance committee reviews the entire process with witnesses and circumstantial evidences. Then and only then that recommendation will be made.

There are institutional arrangements to address good governance or isolated issues. But again, in a company of our size with so much fast growth, there will be issues here and there.

Q: Considering the increase of labour disputes between employees and the company, does this not reflect your combative attitude in dealing with issues?

The claim of an increase in legal disputes is totally baseless. That is decreasing; and the labour union leadership of  Ethiopian Airlines has never been as cordial and friendly as it is now.

Q: Or as subdued and as quiet?

That is not correct.

Q: I remember the Ethiopian Airlines’ labour union from the days of the 1990s; it was outspoken, vocal and assertive?

The one now is also very outspoken. We have weekly and monthly meetings where they bring issues of which we do not know sometimes. We discuss and resolve them. What is the most important thing is that we have a consultative forum where unnecessary disputes are addressed at the initial stages in a standard and structured manner. That is the reason why disputes and complaints have reduced.

The other day, we had a meeting on the renaissance dam. It was a unanimous vote of confidence in one direction, where the union, the management and the employees were on the same page. It is very hard to get that kind of unanimity and unity of purpose. You may not have heard about it because your sources would not talk about this.

Q: I understand that you are Ethiopian Airlines to your core; you grew up in the company and you have risen through the rank and file to the top echelons of the company’s power structure. Is that somehow a disadvantage to you because you may have an obsession that undermines the very thing you are trying to accomplish?

I would not say that. I am a firm believer that if the company grows, employees should grow together. At the end of the year, when the company makes money, employees have to have a share. This is a fundamental principle and has to be done, and I am doing it.

But again, everybody should get rewarded according to their performance. When we tried to do this differentiation – we have a differentiation scheme of 20pc for superstars, 17pc for core employees and 10pc for underperformers – it is human nature that the underperformers find it very difficult to accept that they are judged at that level. And those underperformers will have all kinds of what you have been telling me. Unfortunately, they are your sources and are not representatives of all the employees.

Q: Who do you want to impress more or care for among your stakeholders?

Employees! Well qualified, motivated and aligned employees can produce more; they work hard to reduce costs through eliminating waste and inefficiencies. They can increase their productivity to customer satisfaction and revenue optimisation. Customers are happy because the service is good, they get good value for their money and they will keep on coming back to reward the company. The company in return rewards its employees and the shareholder get to see its capital growing.

Q: However small you say they are, what message do you have for people who think you are actually taking the airline down the drain?

The statistics show the airline is growing; it is the most profitable and the largest airline in Africa. In our 70 years of history, this is seen for the first time.

What makes them think the airline is going down when they are the ones who have seen their salary doubled and tripled in the last five to six years? When they have seen the airline make profits and buy the latest technology in the world? When they have seen it is spreading its wings to five continents and 82 destinations, which has never been the case before? Are they right first?

Q: Despite all these you mentioned, nonetheless, they see in you as a manager who is destroying the human element on the company as a result of your management style?

That is not correct.

Q: Are you not concerned with pilots and to some extent cabin crews who are flying longer hours than what is accepted by international aviation law? While aviation law limits a pilot to fly a 90-hour month, you have pilots who fly 120 hours and 130 hours. You have pilots and cabin crew flying from Washington DC and arrive here in the morning only to fly to a destination in Asia in the evening.

That is not correct; that is utterly and completely false. There is a regulation that we as an international airline have to respect. A crew who came from Washington will have 48 hours to rest before flying again.

Q: What do you do to the people who do that?

We do not allow them to do that.

Q: And I see that you, as an operator, are powerful and more resourceful than the regulator itself to be properly checked on your conducts.

That is not correct; the regulator has be audited by the FAA and maintain its category one, while countries like India lost their category one status.

Q: You have a management philosophy where you put a lot of energy and attention into cost leadership. As a result, quality in services and the safety of passengers is being compromised.

That is not true. If the quality has been compromised, why are passengers still flying with Ethiopian Airlines in bigger numbers, increasing by 20pc every single year?

Q: Let me give you an incident where a while back you fired a couple of guys called “load masters” to save costs. Because there was no-one trained to do the job, there was an incident whereby a cargo airplane was flipped upside down from the front. It was not off loaded properly and professionally.

No load master was fired; there was just a change in job descriptions. The aircraft incident you mentioned has nothing to do with this. There were trained people there for the weight and balance, but they made mistakes; and people make mistakes.

You come here with incorrect information and I am giving you the right one. It is open for you to verify, then we will have very fruitful discussions. I want to correct you on the facts; we are an airline audited by the FAA.

Q: Are you audited by external auditors on your financial books?

Of course, who is lending us all this money? Do you think that international commercial banks – CitiBank, Barclays, the Royal Bank of Scotland and Chase Manhattan – give us the money without auditing our financial statements?

Q: Why do they let you get away with not putting reserves aside for engine maintenance after many years?

I can bring you our financial statement; maintenance reserves is the third largest cost in our books next to fuel and general maintenance.

Q: Let me bring you to another issue. You are an airline and the best you can do is fly. There are too many other operations that provide services to that core business, including ground handling and warehousing. Why do you want to control and monopolise all services? Why don’t you let it go, so that others could join the competition?

What do you mean by let it go?

Q: Liberalise. I ask you this because there was an incident that went to the desk of the Minister of Transport, where operators demanded a fair share of the cargo handling business. Your management opposed it voraciously.

How many handling companies are in Dubai?

Q: Maybe only one?

That is for 123 airlines flying to Dubai.

Q: But you have another example where there are airports in the world where they have more than one operator?

Yes; thus there is no right or wrong answer. It is just situational and depends on the condition and local environment.

Q: What local environment justifies your demand to hold a monopoly on this business?

We are not demanding monopoly. In our “Vision 2025”, we have made analysis and found out that the diversified aviation business model is the right modal for us. In the airline industry, you can be a virtual airline, a traditional airline or you can also be a diversified aviation business, such as Lufthansa or Singapore airlines, for instance. We have made analysis of the environment of our resources of external opportunity and we concluded that the diversified aviation business model is the right business model for Ethiopian Airlines.

The aviation services around the airline, such as academy, cargo and maintenance are important sources of revenue for the airline. Because the demand for these services in Africa is huge, we want to play in that market. For instance, we cannot satisfy the demand in Africa for the academy, thus we grew from our 200 student capacity to a thousand today. Our plan is to grow to 4,000.

Q: Are you disappointed then that the Minister of Transport decided against your wish, allowing an operator to come in?

The airline is a government airline. What makes us disappointed?

Q: You no longer have a monopoly.

We have discussed it and we will do the right thing.

Q: Are you telling me that you are happy to continue competing with the company that is coming in.

Why not?

Q: I saw a recent study commissioned by the government to Nathan Associates Inc, which blames congestion and low productivity in your freight business. Their conclusion is that even if the airline is going to build a new warehouse, which I believe you are doing, it will not be a solution so long as the business is not done competitively?

To put that in the right perspective, we understand and recognise we need to improve our services at our cargo business, especially at Bole Airport.

There have been quite significant numbers of Ethiopians returned from Saudi Arabia. Their personal effects and household goods have been in the pipeline for shipment following the returnees; the volume has increased and the clearance process was slow, causing temporary congestion. It was an unintended, unplanned and unpredictable influx of people and their goods.

They are almost finished now and it will be completed in the coming few months, if not weeks. The last batch of that shipment just came in by Saudi Airlines and Ethiopian Airlines.

The warehouse that we built a few years ago is now being challenged in its capacity and we are building a new and much larger one. It has two phases; in the first phase we build a 600,000tn storage capacity, more than three times we have today. The second phase will enhance it to 1.2 million tonnes. We are also expanding the existing one to accommodate the increasing demand.

Q: With all these expansions, are you not alarmed by the mountain of debt the company is sustaining?

There is a debt to equity ratio that we have to manage and compare ourselves to our peers in the industry. We are at a reasonable level; and as long as the company continues to have a solid balance sheet and remains credit worthy, I am not concerned.

Q: I know that one day you will leave the company, either through retirement or on your own. How would you like to be remembered?

At the end of the day, let the facts speak for themselves. The history books will have their own facts and they will remember me for what I have done. I would rather leave the facts to speak for themselves, for, a man can lie about the number but the numbers cannot lie about the man. (Source: Addis Fortune)

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