Changing Africa – the story of Ethiopian Airlines

When I arrived in Dubai in the end of December 2014, I was able to spot how many different African nations are visiting this city. They were strolling around shops in Dubai Mall, admiring spectacular shape of Burji Al Arab hotel, waiting for their planes at Dubai International Airport or watching dancing fountains show near Burji Khalifa. I remember how extraordinary it seemed to me and how different it was from what I usually see in many European countries. I considered Africa to be just a poor continent involved in the countless local conflicts. I thought it is a place on earth with widespread famine problem and a diseases like Ebola depopulating African countries. My perception of this continent was distorted by media which are informing only about disasters, catastrophes or war cruelty and terror. In Dubai I understood how wrong I was. Of course the problems haven’t disappeared and majority of African nations are still the least developed countries in the world but the change may be just around the corner. Asian and European nations like China started to look for the cheap labour force and invest their money there. Same as China itself, Africa may use low cost manufacturing as an opportunity for dynamic growth and rise from the ashes. The sings of this shift are not visible everywhere but some countries are becoming successful in this strategy. Ethiopia would like to be in the forefront of this rapid development. With over 90 million inhabitants it is the 2nd highest populated nation in Africa only behind Nigeria, which has over 180 million residents. In contrast to Nigeria its growth is not fueled by oil industry. Ethiopia has of course some natural resources, like gold for example. It is additionally exporting coffee, oilseeds and developing floriculture sector (flowers and plants) but it is not sufficient to drive the whole its economy. That is why the country is closely cooperating with China in industrialization of the country. Chinese companies are building shoes and textile factories and moving production from China. Ethiopian economy is booming and was around 10% increase per annum between 2005 and 2013. Despite the pace decreased a little bit in 2014 to around 7 percent (according to World Bank forecast) it is a truly tremendous achievement for the country which suffered a great famine in 1984.

Ethiopian Airlines at kilimanjaro airpotr_flickr_Yoni Lerner (CC BY 2.0)

Ethiopian Airlines, source: Yoni Lerner, Flickr, (CC BY 2.0)

The big progress which Ethiopia made is visible also in aviation industry. Ethiopian Airlines (ET) have become the biggest airline in Africa by fleet size (including all its subsidiaries) and with around 6 million passengers carried in 2014 is also among the biggest by passenger traffic. Only South African Airlines (SA) which hosted 7,1 million travelers on board of its planes and Egypt Air (MS) with 7 million were ahead of Ethiopian in 2014. Royal Air Maroc (AT) carried about 6 million and equals the result of ET. The key nearby competitor Kenya Airways hosted only 3,7 million passengers. Ethiopian plans to achieve 7 million passengers in 2015 and it could then become the biggest African airline in all categories, especially that MS and SA are beginning their restructuring process which may decrease traffic levels. The mutual goal of Ethiopian Airlines and Addis Ababa Bole International Airport (ADD) the main airport in the county and ET hub, is to become a bridge between the Asia and Africa. Both airline and the airport understands African continent much better then any of their Middle Eastern rivals and would like to make use of this knowledge. Ethiopian knows it can’t compete with Emirates (EK), Qatar (QR), Etihad (EY) or Turkish (TK) in service quality so they must look for other advantages. ET would like to offer best valued product, which means they would deeply understand the needs of African passengers and take their lower income into the consideration. Market coverage is very important for Ethiopian that is why it is intensifying its growth in Africa both by opening new connections and buying stakes in smaller local carriers across the continent. So far they bought 49% shares in Malawian Airlines (3W) and 40% of Togo based ASKY Airlines (KP). This acquisitions gave state owned Ethiopian higher penetration of secondary airport. It is additionally currently negotiating with Rwanda government about possible investment in RwandAir (WB) and South Sudan government about establishing new airline there. The time is very precious that is why Ethiopian must develop in really fast pace. The competitors from Middle East all have Africa in their expansion plans and are not willing to slow down their growth. The only solution for ET is to keep up with them and invest money in new destinations and planes.

Boeing 787-8 Ethiopian Airlines_flickr_tagsplanepics-Ihr_(CC BY-SA 2)jpg

Boeing 787-8 Ethiopian Airlines: source: tagsplanepics-Ihr, Flickr, (CC BY-SA 2.0)

In 2012 Ethiopian picked up their first Boeing 787-8 Dreamliner plane and since then their number increased to 11 with additional 2 being on order. At the moment 787s fly to almost 20 destination worldwide and being used extensively in the airline. It is not the only modern plane in Ethiopian fleet. The airline has 3 777-300ER aircrafts its fleet will rise to 5 in the first half of 2015. What is even more interesting the airline has additionally 14 Airbus A350-900 in their order book. The planes will start arriving in 2016 making Ethiopian fleet even more impressive. Just recently airline informed that in the next couple of months it plans to select 15-20 new widebodies which join their fleet. Ethiopian will choose between Airbus A350-1000 and Boeing 777X. This will help the airlines to achieve its growth goals in the future.  ET is constantly opening new routes and in April 2015 it will resume flying to Singapore and start operating to Tokyo via Hong Kong. Additionally in June ET is establishing connection with Manila via Bangkok. I mentioned earlier flying to Asia is a vital part of Ethiopian strategy. The airlines however is willing to grow also in Australia where they would like to fly through Singapore and further expand European and North America network.

Addis Ababa International Airport_flickr_naamanus_(CC BY-ND 2.0)

Addis Ababa International Airport, source: naamanus, Flickr, (CC BY-ND 2.0)

Addis Ababa Bole International Airport is a main hub of Ethiopian and most important part of airline strategy. It is difficult airport though as it is located 2300 meters above see level which causes the decrease of airplanes performance due to thiner air. This is why, the Ethiopian authorities are planning to build new airport a little bit further from Addis Ababa on lower height. This will happen in the distant future, now ADD is serving the country and has ambitious development plans. It now handles around 7 million passengers per year and aims to serve almost 20 million in 2018.

The construction of course is being done by China Communication Construction Company and will cost around 300 million dollars. Chinese companies are contractors for many of big infrastructural projects carried out in Ethiopia. The most prestigious one however, the Grand Ethiopian Renaissance Dam is being build by Italian Salini Construttori but was most likely financed by Chinese banks. ADD is an alternative for Middle Eastern hubs and with a clearly set vision it is not on a hiding to nothing in this tough competition. The example of Ethiopia shows that even very poor countries may have a chance to change their fate once they come up with the right ideas. Ethiopian airlines used its unique location, great knowledge about the continent and developed a strong brand in the Africa continent. Moreover it is prepared for difficult battle with much stronger airlines which operate in this region. It is definitely the one I will watch carefully.

One thought on “Changing Africa – the story of Ethiopian Airlines

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s