What Takes Ethiopian Up the Aviation Ladder




On April 8, 2016, Ethiopian Airlines Group, a.k.a. Ethiopian, started celebrating its 70 years anniversary amid massive expansion of air transport services. Since its maiden scheduled commercial flight from Addis Abeba to Cairo, Ethiopian has shown tremendous growth which earned it the name, “The Pride of Africa”.

Over these years, Ethiopian has managed to maintain its corporate identity of providing excellent air transport service even in times of economic recession and political turmoil in Ethiopia and most parts of Africa. At present, Ethiopian Airlines is the prime airline in Africa, and it flies to more destinations than any other carrier on the continent.

Ethiopian has marked decisive advances in the history of aviation as the first African airline to reach the skies. In recent years, for observers of the global airline industry, not a month goes by without hearing praises of Ethiopian’s strides in providing quality services and expansion of routes.

It is a widely-held fact that registering consistent achievements in commercial aviation is a challenging yet essential component of remaining competitive in today’s global economy. For African airlines, this challenge is only made more difficult given the negative connotations that persist within the aviation industry. But, irrefutably, the legendary Ethiopian Airlines always paints a different picture.

Contrary to the perception of Africa’s aviation being bracketed together by inferior standards of aircraft, inadequate airports and aviation facilities, Ethiopian has stood the test of time and has remained a pioneering company in the industry with exceptional standards. I agree with those observers who say that the airline’s success story stuns many who question Africa’s capability to run modern institutions efficiently.

While most of the major airlines in the world, and particularly those in Africa, have endured very tough times in recent years, Ethiopian has won a number of industry accolades and seems to go from strength to strength. For instance, it received the 2011 African Airlines Association (AFRAA) Award for being consistently profitable over the years and even won the “African Cargo Airliner of the Year 2011” award for its excellence in handling air cargo. Moreover, the company’s Aviation Academy was voted in 2014 as “The Best Airline Training Service Provider of the Year” by AFRAA. It is also cheering to know that Ethiopian sparked aviation vocations within the female population in Africa in its bid to improve gender balance in the industry, when it made its first flight operated by an all-female crew in November 2015.

In the economic sphere, Ethiopian has been able to generate sustainable long-run business growth, a stride attributed to the interplay of many factors. According to the 58th edition of World Air Transport Statistics, issued by the International Air Transport Association (IATA), Ethiopian was the largest African carrier with revenue topping 2.3 billion dollars in 2013, and it was also a leader in operating profit. In 2015, the profit the company garnered was more than that of the combined profit posted by the rest of the African airline industry.

Indeed, Ethiopian has moved up a notch in the success ladder as one of the carriers that keeps an enviable balance sheet in an otherwise ‘fuel-price-ravaged’ industry, and makes consistent improvements in service standards. It was also chosen as Worldwide Customer Service Leader by Service Quality Institute in recognition of its outstanding and cutting-edge customer service. This, however, remains an incremental change in Ethiopian’s overall strategic capability. We can attribute the success of the airline to several factors.

One factor that has kept the dynamic gains of the Airline is the probity of the enterprise in fleet system modernisation. In the aviation sphere, it is axiomatic that an airline considering expansion into international markets characteristically cannot pursue that ambition without long-range, wide-body aircraft. Ethiopian has acquired a fleet of 76 aircrafts, of which 30 of them are for long-range passenger services, including 13 Boeing 787 Dreamliners.

In view of fleet modernization and a desired increase in efficiency, the carrier has 42 additional aircrafts on order, including eight Boeing 787s, and 14 A350-900s from Airbus. In December 2011, the 787 touched down at Bole International Airport, “to kick off the Africa portion of Boeing’s Dream Tour”, with Ethiopian being the first airline in Africa to operate this impressive new aircraft. More specifically, Boeing 787 Dreamliner is believed to be an environmentally friendly super-efficient airplane and it is perhaps the clearest articulation of Ethiopia’s approach to a climate resilient greener economy.

In September 2014 alone, Ethiopian agreed to buy 20 redesigned 737 aircraft models valued at 2.1 billion dollars in the “largest single order for Boeing (BA) Co. planes from African continent.” In essence, acquiring new fleet systems and retrofitting existing capabilities is a key component of the Airline’s 15-year strategic Vision 2025 Roadmap, which envisions expanding its business to carry 18 million passengers a year. This goes for Ethiopian’s aspiration to possess as many superior and efficient aircrafts as possible.

A flurry of changes in markets may require an airline to reconfigure its fleet. As a result, Ethiopian’s older generation fleets are being retired, to make room for an injection of state-of-the-art aircraft into the veins of the carrier. This will enable it to operate one of the youngest and greenest fleets in Africa. Placing new aircraft orders, in the current uncertain economic conditions, could have involved robust economic forecasting and strategic thinking, as aircraft purchase takes time, and this is conceivably the most intricate part of the planning process in the aviation sphere. By doing so, Ethiopian is asserting a strategic regional role that is in line with the burgeoning weight the company carries in the aviation industry.

Even in the last global economic slowdown the secret behind Ethiopian’s cost-effective expansion was simple – it was driven by encouraging gains in efficiency. Ethiopian has surely matured on the global stage during its long operation, and has moved up the value-added chain.

When tracing the history of the Airline’s progress, it is clear that today’s remarkable results were the result of longstanding and continuous developments. Ethiopian has echoed the Pan African call that Africa must unite in order to realise its renaissance. Since its founding in 1945, the Airline has moved to broaden its foothold on the continent and further connected it to the rest of the world, by steadily realising its inspiring maxims of “Bringing Africa Together,” “Africa’s Link to the World”, “Connecting Africa to the Rest of the World”, and “The New Spirit of Africa”.

In the early 1960s, Ethiopian was the official presidential airline for most African Heads of State. Indeed, it served a facilitating role for convening the May 1963 Addis Abeba Conference of African Heads of State, which resulted in the creation of the Organisation of African Unity (OAU), now the African Union (AU).

Another reason for its success is the fact that Ethiopian is truly committed towards Africa’s integration. This commitment to inter-connect Africa has been congruently aligned with the long-term commitment of successive Ethiopian governments to the ideals of Pan Africanism. And it can be argued that such dedication on the part of the governments is not just political hot air, but they have made business sense in the long-term.

If memory serves me well, I once heard the then Managing Director of the Ugandan Civil Aviation Authority saying gratefully that, “Ethiopian was the only airline that never stopped flying to Uganda even while the country was in a dreadful adversity of war.”

I believe this remark conforms to a larger pattern signifying Ethiopian as a truly pan-African carrier. Indeed, it takes an audacious level of determination to wing away trepidation in hard times.

In addition, Ethiopian has long been dispelling the negative myths associated with Africa, and its success factors herald the narrative of Africa rising. I also believe that, given its proven capability, the Airline can notably contribute to the realisation of having a top-notch integrative network that crosses the continent, as is rightly stated in the African Union’s Agenda 2063.

In this collective vision and roadmap for deeper and greater integration of the continent, African leaders agreed that African Passport would be introduced with the abolition of visa requirements for all African citizens in all African countries by 2018. We can imagine that free mobility of people, capital and goods will generate greater demands for the Airline’s services.

In December 2011, Ethiopian became the 28th member of Star Alliance and the third to join in Africa, after South African Airways and Egyptair. This decisive move would provide worldwide reach via the extensive Star Alliance network. The network offers seamless travel options and frequent flyer programmes (FFP) among other benefits. This would further assist customers to get fair prices, increase air traffic volumes and frequency of services. According to the Star Alliance’s regulations, all airlines must comply with the highest industry standards of customer service, security and technical infrastructure. This has also been a quantum boost to the existing good safety records in which Ethiopian had already taken great pride. Within the network of alliances, Ethiopian has been able to offer better “flight option for its passengers, quick transfers and convenient check-in procedures”.

What wave of cascading forces brought Ethiopian to membership in the Alliance?

It was the culmination of the hard work and determination necessary in order to prove its capacity to join such a prestigious alliance, all the while continuing to provide customers a consistent level of excellence. And these unwavering accomplishments in turn reward Ethiopian with more market access as member airlines fly to more than 1,300 destinations, with easy travel and quicker connections. It also opens up access to more than 21,000 daily flights in 200 countries. Moreover, the Alliance increases the traffic volume and subsequently, revenue to Ethiopian.

Viewed from the prism of aviation economics, the industry is often affected by towering influences of economic uncertainties and instabilities. It is cyclical in nature, which makes it vulnerable to the vices of the international economy. Thus, it is formidably difficult for a solitary airline to survive such perfect storms in a weak global economy. This fact has therefore driven carriers to form alliances so that they can bring returns and share high fixed costs of major investments, especially given the advanced and costly technologies of the aviation industry.

Most aviation economists believe that the creation of alliances enables airlines to build global networks at reasonably little extra cost, attaining economies of scale through resource pooling across operational areas. This is the cost minimization advantage that oils the Airline’s wheels. Undoubtedly, it also ensures continuous improvements in service standards and fosters a sense of pride for the country whose flag Ethiopian carries.

For Ethiopian Airlines, which has perpetuated its reputation for “turning profits for almost all the years of its existence”, there is also an added advantage that could be gained to counter any problems of limited capacity and falling yields due to unpredictable circumstances. This will help to retain current markets managed through seat capacity and shared operations. Apart from this, joining strategic alliances enables Ethiopian to overcome some restrictive barriers to enter international markets. It is widely believed that alliances have taken a strategic departure from customary partnership methods towards the creation of global networks and a common strategy.

The bedrock from which all these ongoing achievements is launched is the philosophy of synchronising leadership and staff commitment, strategic vision, cost management and customer satisfaction. This being the case, however, it cannot be said that the challenges are few: for instance, Ethiopian is facing stiff competition from non-African airlines within Africa. Although it can be understood as an opportunity to promote more growth, it is still not an easy task.

This is because of the delicate nature and cut-throat competition of the aviation industry. On the one hand, to navigate through such stiff competition, while staying afloat, is tough, to say the least. On the other hand, it is also a great indicator of Ethiopian’s success and its ability to be more innovative and continuously employ the winning formula: managing customer expectations.

Good customer service management emanates from discipline, investment and deeper understanding of customers. Ethiopian has invested in many customer service initiatives, and has thus benefited from a constant increase in aeronautical revenue through a rise in customer loyalty and retention. However, a lot remains to be done in this sphere.

I believe that synergy should be further enhanced among local stakeholders to improve airports’ ability to exceed the ever-evolving customer expectations. There is no doubt that excellent airport facilities and services, such as courtesy and helpfulness of airport staff, give passengers an enjoyable and enabling airport experience. It is therefore incumbent upon airport authorities to equip the staff with professional knowledge of services and make them behave kindly and courteously to win customer trust and confidence.

 



By Negus Kebede
Negus Kebede is director for Business Promotion at the Ministry of Foreign Affairs (MoFA). He has a Master's Degree in Economic Policy & Planning from Makerere University, Uganda. Opinions expressed in this commentary do not reflect the view of the organisation with which he works. This commenatry is the first of a two-part series.

Published on May 10,2016 [ Vol 17 ,No 836]


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