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Tuesday, August 28, 2018

ETHIOPIAN AIRLINES HAS GOT IT RIGHT

This month Ethiopian Airlines announced a profit of $229m (sh800b) for the year that ended in July. They are the only profitable airline on the continent.

But what was making news this week was the news that Ethiopian Airlines is signing up partnerships across the continent to set up or take a stake in existing airlines.

According to the reports Ethiopian Airlines has taken significant stakes in regional airlines, in the case of Mozambique Airlines has full ownership. Chad, Guinea, Malawi, Mozambique and Zambia have already put pen to paper. It is reported that Djibouti and Nigeria are on the verge of signing on.

"As if it was not clear yet what Ethiopian Airlines strategy was, at the beginning of the month they signed up with worldwide courier DHL with a view to making Addis Ababa the main logistics hub on the continent...

Ethiopian Airlines’ ambition is to become one of the biggest airlines in the world and to that end they intend to double their fleet current 108 plane fleet in coming years. The current activity on the continent is aimed at that target. They are off to a good start, last year they flew 10.6 million passengers to 125 destinations around the world.

Started in 1945, the airline, regardless of regime, has been run along strict corporate lines and its expansion through partnerships around the continent is the logical conclusion seeing as the airline covers the most destinations on the continent.

Already Ethiopian Airlines counts in addition to Bole International Airport in Addis Ababa, Malawi’s Lilongwe international airport and Togo’s Lome Airport as its hubs.

They more than any other airline, have reached a stage where the colonial boundaries that balkanise the continent are an inconvenience that can, and must be transcended. But they are also showing that more than high sounding speeches, trade and commerce is what is going to bring the continent together and ensure it takes its rightful place at the high table of world affairs.

In truth a continental or even regional airline will make more economic sense and therefore ensure long term viability.

Their growing capacity also means that they are now developing secondary industries like training, aircraft maintenance, which they have been doing for themselves and other airlines for years and are soon embarking on making parts for airlines. As a spin off they are already considering setting up an aerospace industry.

"Given the history of the airline, run on sound corporate lines and with a long term strategic view of the industry both locally and internationally, it is a safe bet that they will take advantage of this first mover advantage to cement their dominance of the continent’s skies....

Especially as South African Airways and Kenya Airways are floundering under the legacy of previous poor governance set ups as and Egypt Air is failing to get any traction.

Ethiopian Airlines serves many lessons for parastatals – it is 100 percent government owned, across the continent.

One, that the parastatal is created to serve clients, who may not necessarily be nationals and is not set up to serve the interests of a small connected clique.

Secondly, that for long term viability, profit cannot be a by the way. Like any business, cost effective management is critical. As it is now Ethiopia is suffering a foreign exchange crunch because of the huge debt repayments that are coming due, but the airline goes on as usual. It does not rely on the benevolence of the Ethiopian state to stay afloat.

And finally great endeavours take time. Ethiopian Airlines is in its 73rd year. What we celebrate today has come after years, no decades, of disciplined action anchored by strategic thinking. The airline did not get where it is through wishful thinking but through a brutal and honest assessment of the marketplace at every turn of their history.

Assuming they continue as they are, but most likely they will only get better, it is not a stretch of imagination to foresee that they will be the only airline worth talking about in a decade or two in Africa.

Word on the grapevine is that they had actually offered to help Uganda set up its own operation. But the model they had sold us was one where the CEO and finance manager would be their appointees. Our people did not find palatable, for obvious reasons.


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