Ethiopian Airlines is upgrading its fleet and service standards as it strives to maintain its leading position in trans-African flying in the face of strong competition
Airline slogan changes are often an empty exercise. United's "Rising" campaign of the late 1990s, for example, was a harbinger of anything but an imminent ascent. However, the recent move by Ethiopian Airlines to change its decades-old motto of "Bringing Africa together" to "Africa's link to the world", denotes a growing understanding of the carrier's role in the continent's airline sector. Additional signs of change at Ethiopian's Addis Ababa base are abundant, too, as the carrier - with 58 years of experience it is Africa's second-oldest - unveils a new fleet, livery and even chief executive.
For years, the state-owned airline's hallmark was that it was the first to fly from East to West Africa, service only it offered for decades. These flights were launched and maintained, in the face of significant losses, at the directive of then-Emperor Haile Selassie, a fervent believer in the pan-Africa movement. Ethiopian now has no intention of turning its back on this historical legacy of connecting African communities, not least because it has become the most profitable and highest-yielding part of its network, as trade and travel within Africa have begun to flourish.
Transafrican flying may have started as a social project, but "now it's a business, and it's working well", explains Girma Wake, who after 12 years in the Middle East, for a long time as Gulf Air's head of cargo, returned to Addis in February to take over from retiring chief executive Bisrat Nigatu. Girma started his career with Ethiopian and worked there for 27 years before going to Gulf Air.
Although these services have become the linchpin of its route network, geography does not favour Ethiopian's focus on service within the continent, based as it is in Africa's northeast corner. Its location is ideal, however, for connecting eastern and southern Africa with Europe and the USA, and passengers from throughout Africa with cities in Asia and the Far East. This latter is especially key, as business between the two continents is growing fast, particularly between China and West Africa.
Accordingly, Ethiopian has increased service to the region, recently adding a flight to Guangzhou to existing services to Beijing, Hong Kong and Bangkok. Elsewhere, it added a third weekly frequency to its Addis Ababa to Newark/Washington Dulles flight, and put Paris and Stockholm on its route map.
To enable these plans, Ethiopian has embarked on a scheme to replace its Boeing 737-200s with six next-generation 737-700s and its four 767-300s with six brand new models of the extended-range type. The deal, which has already seen three new 737s and a new 767 land in Addis, will be completed in July 2005 when the final 767 is delivered. The carrier also holds an option for three 777s and five more 737s.
Girma explains the impact the new aircraft will have on the carrier's development, saying the net addition of two long-haul types will allow it to open new international stations - he mentions Toronto and Brussels as leading candidates - and also add more frequencies to existing destinations. Just as important are the next-generation 737s.
The short-to-medium-haul aircraft's vast range improvements over the carrier's current ageing 737-200s now allow it to fly more appropriately sized 737s to Johannesburg, Karachi and Mumbai, where before it had to operate 757s. The ripple effect of the upgrade frees up time on the 767s, allowing an up-gauge on services to Lagos and destinations in India with high passenger and cargo demand.
Cargo conversion
It also means some of its four passenger 757s may be converted to dedicated cargo, joining the one it currently operates. The carrier enjoys solid demand for perishable goods, such as flowers in Europe (in the winter it flies six weekly cargo flights to Brussels) and meat to countries in the Persian Gulf. Cargo currently represents about 14% of its revenue, which Girma can see rising to 20%.
The new chief executive inherits a company that has been profitable for most of its recent history, having generated net revenues of 276 million Ethiopian Birr ($31.7 million) for the year ended June 2003. He notes that over the past 10 years, the carrier lost money only in 1998, when Ethiopia was at war with neighbouring Eritrea and insurance policies required it to shift its long-haul operations to Nairobi. Eritrea continues to represent a problem area for the company. Before the war, its capital Asmara accounted for 35% of Ethiopian's long-haul traffic; now, with relations between the two countries frosty, it no longer flies there, or even over its airspace.
Although it theoretically enjoys insulation from government interference, Ethiopian staffers concede that the state would be unlikely to let it cut service to its 23 domestic stations, even though one manager says that they are "a big burden; they wouldn't be profitable with 100% load factors". For his part, Girma admits that the routes have not been system stars, but insists they can become profitable. He has even tabled a tentative proposal to delay the retirement of the 737-200s, and use them on some of the larger domestic routes - like the historic city of Gondar - if the government makes the necessary runway upgrades.
"As tourism develops, these routes will see greater passenger numbers, enabling us to put larger aircraft on the routes and phase out our Fokker 50s, which have such high unit costs that profitable operation is almost impossible," he says, adding that in any case, the company has a deeper interest in continuing to serve the routes.
"There are some goals the government wants us to help with, such as domestic air service, but that's not just a burden, it's also an investment. We have to grow with the country. If the country doesn't grow we're in trouble." The theme is a popular one with Girma, who believes the carrier has already benefited enormously from expansion in Ethiopia, which is home to numerous international bodies, including the African Union and the UN Economic Commission for Africa, and whose population is among the continent's more mobile.
Of greater concern is the encroachment into key routes to Lagos and Accra by Kenya Airways and Emirates. The entrance of Emirates is a particular threat because of its high service reputation and its extensive network to the Far East and the Middle East, another vital Ethiopian market. But Girma professes to be not overly worried. He admits that yields have been under some pressure, but adds that passenger numbers have held up.
Of course, he also acknowledges that the competition will force Ethiopian to increase its efforts. "Our image is not low now, but when you're competing with Emirates, you cannot expect passengers to stay with you unless you offer comparable quality." With this in mind, the carrier has begun to upgrade its offerings, focusing on on-time performance and ground and inflight services.
A recently completed $123 million facelift at its Bole airport helps, as do the fleet acquisitions, which both minimise some of the mechanical delays the older aircraft were beginning to incur, and allow the carrier to unveil new economy-class seats - complete with individual seat-back video monitors - and its new Cloud Nine business class.
USA route
The biggest service upgrade of all, however, is that of a possible new route to the USA. Ethiopia is currently in open skies negotiations with the USA, which would allow the carrier to fly traffic from a third country, which Girma says would be based in West Africa. Flying from Addis to the USA via West Africa would not diminish its service standards as Ethiopian's US flight already makes a technical stop in Rome, and the incremental traffic would be significant.
"It's another way to connect Africa with the world," Girma says. "We could fill the serious service gap that exists there and also promote travel to Africa by African-Americans." He adds that if Ethiopian is able to launch the route, the traffic levels could well be significant enough to see the carrier activate some of its 777 options.
Service enhancements, aside, however, Girma believes Ethiopia's biggest advantage in the market is customer loyalty. "The entrance by Emirates and Kenya was not a surprise. We have always developed markets alone only to face competition when they mature. But this approach means that passengers remember us and are loyal to us. In West Africa the frequent travellers know our crews by name."
Girma himself knows a thing or two about loyalty. When he was approached about taking up the vacated helm of the flag carrier, his inclination was to decline, both because he thought Ethiopian needed someone younger for the post and because at this stage in his career he was not sure he wanted to return to a 14-hour-plus day and seven-day-a-week schedule.
But the carrier's board persisted, asking him to stay for three to five years and help groom a successor, and he was won over. "I was very happy in the 27 years I was with Ethiopian. When they said I really was their first choice, I relented. I could not turn my back on this company."
REPORT BY RICHARD PINKHAM IN ADDIS ABABA
Source: Airline Business
