Airlineberg Analysis; Growing Alone- Ethiopian Airlines
By algevis - Tue Apr 10, 11:34 pm
Airlineberg Analysis; Growing Alone- Ethiopian Airlines
Which airline in Africa will be first operator of Boeing 787 Dreamliner? If you said South African Airways, Kenya Airways or Egytp Air, you would be wrong. The answer is Ethiopian Airlines, which offers direct flights to 66 international and 17 domestic destinations from Ethiopia with a current fleet of 48 aircraft and a fleet on order of 43 aircraft.
According to the airline’s reports, Ethiopian Airlines is not just adding new aircraft into the fleet, it is adding passengers and cargo traffic too. Over the 5 years to 2011 it doubled the number of air travelers carried, and it tripled the carried cargo with increased traffic to Europe, North America and Asia playing a large role., despite the challenges in 2011 such as following the Arab Spring, rising crude oil price from an average of USD 79 per barrel to a peak of US 122 per barrel, the weak economies in Europe, USA and the civil unrest in North Africa and the Middle East.
“My executive management had to battle with such a daunting challenge in a time when we have embarked on to one of the most ambitious growth and expansion program in line with our Vision 2025 strategic road map.” noted Tewolde G. Mariam, CEO of Ethiopian Airlines. “However, with strong teamwork, dedication and hard work among all the 6,300 brave men and women of the airline, executive management and the Board of Directors, we have made it an eventful, demanding, but ultimately successful financial year. ” he noted in annual report 2011 of the airline.
Network and Strategy
The airline’s strategy is based on maintaining high frequency strategy rather than network expansion. As a network expansion, they opened Hangzhou, Bangui, Milan, Maputo and Malakal routes in response to the growing demand of our customers. Ethiopian Airlines is helping and playing a leading role in transforming Addis Ababa and Ethiopia into a world class aviation hub of the African continent not only for trade and business but also for tourism. Addis Ababa is now becoming a pivotal link that is connecting four continent. Ethiopian is building on its location, where traffic between Asia, Africa and Brazil intersects. New destinations are being introduced to maximise the benefit of the hub service it operates out of Addis Ababa. It will start its service to São Paulo in December. “If you draw a line between India, Brazil and Africa, we are in the middle. We have to take advantage of that and grow our market in order to survive,” Mr Gebremariam said.
Africa – 41 Cities
Abidjan, Abuja, Accra, Addis Ababa, Bahir Dar, Bamako, Bangui, Brazzaville, Bujumbura, Cairo, Dakar, Dar es Salaam, Dire Dawa, Djibouti, Douala, Entebbe, Harare, Johannesburg, Juba, Khartoum, Kigali, Kilimanjaro, Kinshasa, Lagos, Libreville, Lilongwe, Lome, Luanda, Lubumbashi, Lusaka, Malabo, Malakal, Maputo, Mekele, Mombasa, N’Djamena, Nairobi, Ouagadougou, Pointe-Noire, Seychelles and Zanzibar.
Brussels, Frankfurt, London, Milan, Paris, Rome, Stockholm and Washington
Washington, Sao Paulo (Sao Paulo in December)
Gulf, Middle East
Bahrain, Beirut, Dubai, Demmam, Jeddah, Kuwait, Mumbai, Muscat, Riyadh, Sana’a, and Tel Aviv.
Bangkok, Beijing, Delhi, Guangzhou, Hangzhou, Hong Kong
Ethiopia Airlines is adding new destinations and frequencies to not only its international network, but also its domestic network. As a national flag carrier, Ethiopian Airlines has been supporting the ever increasing tourism market of the country as well as business travel, supported by the country’s fast economic growth. Currently, the airline provides flight services to 17 domestic destinations, which is the largest domestic network in Africa.
As a part of the Africa development strategy, Star Alliance approved the memberships of Ethiopian Airlines to join Star Alliance in late 2011. Ethiopian Airlines had added five new countries (Chad, Congo, Djibouti, Mali, and Niger) and 24 African destinations to the Star Alliance network, and then the alliance reached a total of 29 carriers, offering a choice of more than 21,380 daily flights to 1,196 destinations in 186 countries.
In July 2008, Ethiopian Airlines entered a strategic partnership with Lomé–based start–up airline ASKY Airlines to strength and improve the presence which Ethiopian holds a 40% stake. All aircraft maintenance and operational management will be under Ethipian Airline’s umbrella. The main strategy was to turn Lomé into Ethiopian Airline’s regional hub for the West African market. ASKY started operations in January 2010 and became profitable after a few months.
Hotel Project and Tourism
Ethiopian Airlines has been seeking international companies to build a four-star hotel in two and half years, on a plot near Bole International Airport, Addis Ababa plan its management has been tinkering with for years now. Estimated to have cost 300 million Br two years ago, the national carrier wants to see a hotel of international standard is built on a 40,000sqm plot it has on a land opposite to the Millennium Hall, on Africa Avenue (Bole Road). The company has invited last month international construction firms to “design and build” on a turn-key contract basis. The hotel will support Etihopian Airline’ s network strategy.
Ethiopia is one of the African countries that possess the highest number of UNESCO World Heritage Sites in Africa, with 8 sites spread throughout the whole country, and therefore has great potential to develop itself as a tourist destination.
Ethiopia is a strategically important country in the Horn of Africa for most countries and therefore, many international meetings and conferences are held in Ethiopia. This creates a huge demand for accommodation and air travle at an international standard and even an increase in sucha demand is expected in the future because the importance of Ethiopia has been growing and many international organizations have been continuously strengthening their institutions and augmenting their personnel in Ethiopia.
Ethiopian Airlines operates the Youngest Fleet in Africa with an avarage of 9,5. The following are the major categories of owned and leased aircrafts:
|Long Range Passenger Services||5 – Boeing 777-200LR
11 – Boeing 767-300ER
|Medium Range Passenger Services||7 – Boeing 757-200 ER
5 – Boeing 737-700
6 – Boeing 737-800 [2 with Sky Interior]
|Regional and Domestic Passenger Services||8 – Q400 DHC-8|
|Cargo and Non-Scheduled Services||2 – Boeing 757-260F
2 – MD-11F
2 – Boeing 747-200F
|Total operating fleet||48 Aircrafts|
|Fleet on Order|
|Long Range Passenger/Cargo Services||12 – A350-900 from Airbus
6 – 777-200F for Cargo
2 – 777-300F for Cargo
10 – 787-8 DreamLiner from Boeing
|Long Range Cargo Services||4 – 777 Freighters from Boeing|
|Medium Range Passenger Services||8 – 737-800 from Boeing|
|Regional and Domestic Passenger Services||5 – Q400|
|Total fleet on order||43 Aircrafts|
The airline is very succesful on financing their fleet investment without any government support. Last year, Ethiopian Airlines and Africa Finance Corporation (AFC), in collaboration with other international financial institutions, had concluded the co-financing of five new Boeing 777-260LR aircraft for an amount of 670 Million USD The acquisition of the new airplanes was in line with the Airline’s fleet modernization and expansion program. The AFC provided USD 24 million as part of a second lien loan tranche of the fleet financing plan. The project is financed with senior debt from US Eximbank, and the second lien loan provided by the Africa Finance Corporation, African Development Bank, and PTA Bank. Citibank N. A. was the mandated lead arranger for the transaction. Commenting on the support provided to the Project and the company’s long term investment plan, Andrew Alli said “the AFC will continue to partner with institutions such as Ethiopian Airlines, in its quest to achieve and surpass its worldwide competitors in continued technical and service excellence and capacity development, and in so doing execute on our mandate to bridge the infrastructure investment deficit in Africa”
Nicky Smith from Business Day in South Africa reported that it is clear that the airline will not get any government money and has to run as a commercial concern. To meet its vision of “fast, profitable and sustainable growth”, Ethiopian had a “heavy order book” said by Mr Gebremariam, CEO of Ethiopian Airline. Over the next three to five years it plans to take delivery of 10 Dreamliners, with the first set for August and four more next year. The “ticket price” of each Dreamliner is $100m. Funding is coming from internal sources and “partly from the banks”, Mr Gebremariam added also and he noted that “We have to run like a private enterprise. Our growth must be fast to capture the opportunity of the new markets, but it must also be profitable and sustainable so that we can pay the banks,”
When you review the Etihopia Airlines clause in Wikipedia, you will see this note: “The airline was featured by The Economist as an example of excellence in late 1987, and economist Paul B. Henze recognized it in 2000 as being “one of the most reliable and profitable airlines in the Third World”. This situation has not been changed so much. Today, The Ethiopian Airlines, one of the few African carriers still maintaining a profitable edge, is also in the process of buying several aircraft to boost its route network within the Eastern Africa region.
Ethiopian Airlines started “Vision 2010” in 2005 which aimed to increase passenger traffic to 3 million, revenue to US$1 billion and employees to 6,000 by 2010.
In July 2011, Ethiopian was named Africa’s most profitable airline for the year 2010 by Air Transport World, and it has also been praised by AFRAA for its sustained profitability over the recent years. It is 100%-owned by the Government of Ethiopia, and has 6,318 employees, as of 31 December 2011.
In 2007, Ethiopian Airlines started to provid basic pilot and aviation maintenance training to trainees from African countries including Chad, Djibouti, Madagascar, Rwanda,Sudan and Tanzania. Other training was given to employees of Kenya Airways, Air Zimbabwe, Bellview Airlines, Cape Verde Airlines and Air Madagascar. During the period 2010/11 a total of 236 basic trainees from third party clients were admitted and graduated. In addition, a total of 1,222 participants from third party have taken our recurrent training.
SWOT Analysis of Ethiopian Airlines: Exclusive Summary
- Ownership : Ethiopian Airline is a flag carrier and a stated owned company, the governmet is fully supporting the airline’s activities
- Brand : The most awarded airline in Africa
- Hub : Addis Ababa is very well located hub for the traffic between Intra Africa-India/South Asia and Latin America-India/South Asia
- Profitability : Airline has a good reputation and credibility
- Network : Star Alliance membership and Interline Agreements.
- Domestic market : Weak Domestic demand and low revenue from home market
- LF : Lower load factor comparing its major competitors (%71-72)
- Route Structure : Costly operation due to route structure
- Fuel Cost : Higher Fuel Cost
- Financial Source : Lack of financial support from Government
- New Planes : B787,A350,B737NG Sky Interiors and Q400s
- New Destinations : Latin America and China/Asia Destinations
- Vision 2025 Strategy: Very well dedicated and educuated staff
- Investments and Trade in Ethiopia: Foreign Investors’ activities
- Cargo Traffic : Increasing cargo traffic and new market
- Third Party Business : Additional Revenue opportunites from Training and MRO Facilities
- Oil price volatility
- Gulf Regions Carriers and Competition
- Rivals from Africa; playing same role in Africa
- Financial Risks and Interest Rates
- Aircraft Payments
- Currency Risks
Ethiopian Airlines, one of the largest and fastest growing airlines in Africa, made its maiden international flight to Cairo in 1946. With the latest addition of new services to Seychelles, Ethiopian provides dependable services to 66 international destinations spanning four continents.
Ethiopian is proud to be a Star Alliance Member. The Star Alliance network is the leading global airline network offering customers convenient worldwide reach and a smoother travel experience. The Star Alliance network offers more than 20,500 daily flights to 1,293 airports in 190 countries.
Ethiopian is a multi-award winner for its commitment and contributions towards the development and growth of the African aviation industry and in recognition of its distinguished long-haul operations enhanced by the introduction of new routes and products. Recently, Ethiopian won Gold in the African Airline of the Year 2011/2012 Awards organized by the African Aviation News Portal. Ethiopian also received the 2011 AFRAA award for being consistently profitable over the years and has won the “AFRICAN CARGO AIRLINE OF THE YEAR 2011 Award” for its excellence in air cargo. Ethiopian also won the NEPAD Transport Infrastructure Excellence Awards 2009 and “the Airline of the Year 2009 Award” from the African Airlines Association (AFRAA).
With its acquisition of and firm orders for several new modern fleet, the airline is well positioned to pursue aggressively the implementation of its 2025 strategic plan to become the leading aviation group in Africa.
by CAGATAY FIRAT, Managing Partner, CF Aviation
Cagatay Firat, is an aviation professional and consultant, has over 14 years experience in aviation with 10 years of managerial roles in Aircraft Leasing, Fleet Planning, Strategic Planning in Turkish Airlines,THY. For further information and questions; firstname.lastname@example.org