(theafricareport)—Despite being state-owned, Africa’s largest airline by revenue and profit has long been free from government meddling. This is one reason why Tewolde GebreMariam, Ethiopian Airlines’ CEO since 2011, has survived the country’s recent political revolution. New prime minister Abiy Ahmed has purged senior staff from other state-owned enterprises, but Tewolde’s team and vision remain intact.
Another reason is that under his stewardship the company has made extraordinary progress. Its net profit in the 2017/18 financial year rose to $233m, from $229m the previous year, while its operating revenue rose by 43% to $3.7bn – figures unmatched by any other carrier on the continent.
Vision 2025, a 15-year strategy drawn up in 2010, has been so successful that Tewolde is already working on a scaled-up successor for 2030. The fleet is only 20 planes away from its target of 120 by 2025, which would make it the continent’s largest. “It is a remarkable success,” Tewolde told The Africa Report in his office next to Bole International Airport, which is fast becoming one of the continent’s busiest hubs. “Some of the targets we set in 2010 to be achieved by 2025 we achieved by 2016.”
Tewolde, who joined the airline in 1985, attributes its success to long-term planning. For instance, in 2008 the company put in an early order for a fleet of Boeing 787 Dreamliners; in 2012 it became the first airline in the world outside Japan to fly them. “To succeed in the aviation business […] you need to plan for a long-time horizon,” he says.
Today, the company is busy exporting its model across Africa, buying stakes in existing airlines in Djibouti, the Democratic Republic of Congo, Eritrea and Equatorial Guinea, as well as setting up new ones in Chad, Ghana, Guinea, Mozambique, Nigeria and Zambia.
He brushes off criticisms that such rapid expansion risks a crash landing. “We are very conscious about that,” he says. “We don’t want to do it too fast and too far. We always do sensitivity analysis [and] we have a very prudent financial management system. We make sure we are not overstretching at any point in time.”
He continues: “It’s not top-down. We do it where there is a market for it. For instance, Chad. Chad is a big country, centrally located, and there is no domestic service. There is also no airline connecting Chad with its neighbours.”
Ahead of the curve
The company has not been entirely untouched by the country’s changes over the past year. In June, the government announced plans to privatise a raft of state-owned enterprises, including part of Ethiopian Airlines. Many Ethiopians were highly critical, questioning the logic of selling shares in one of the country’s few reliable sources of hard currency.
Tewolde argues: “At the end of the day I understand [the idea] is to create more competition, either domestic or international, so that these state-owned enterprises become efficient in delivering products and services. That is the macro-level thinking behind the agenda. So when you see it from that perspective, Ethiopian Airlines is already ahead of the curve: it is already competitive, doing very well, growing very fast, being very profitable and financing its own growth. […] So it may not be as urgent an agenda as it is for the rest of the state-owned enterprises.”
In the long term, he says the airline may offer shares to other African countries, but mostly “big countries, big economies like Nigeria, South Africa, Ghana and so on.” Non-African investors are less sought-after, although the company is looking for major international firms as partners in some of its other activities, such as hotels, manufacturing and catering.
In March, it announced a partnership with global logistics company DHL. “We want to learn from them and the objective is to make ourselves the leading logistics provider, not only in Ethiopia but in the whole continent of Africa,” says Tewolde.
This is a reminder that, despite the recent changes, Ethiopian remains what the CEO calls a “strategic asset and a policy instrument” for the government. Its key role in logistics is designed to aid the country’s industrialisation. Tewolde also notes the company’s role in promoting agribusiness by increasingly buying local products, such as juice, for its catering service. And it is at the same time playing a central role in developing Ethiopia as a tourist destination.
Though Tewolde is confident that the government’s “globalisation and liberalisation agenda is going to help the airline,” he admits to significant challenges operating in Africa. Not all governments are fully on board with the company’s pan-African vision, a vision which led it to take a key role in pushing for the African Union’s single market for air transport launched earlier this year.
“The main challenge is the lack of proper attention given to aviation by African countries,” Tewolde says. “At the policy level, African governments, unintentionally, consider aviation a rich man’s means of transport. They don’t consider it as an essential public service for the average person.”
He continues: “As a result of this wrong conception you have misguided policies in most African countries. For example high taxation. African countries consider aviation as a cash cow. […] African countries are also not investing enough in aviation infrastructure […] and they are not creating enough multi-modal logistics hubs which otherwise might have helped them in their economic development. Today in Europe the cost of air travel and rail is almost the same; sometimes air is even cheaper. So I see this as a major challenge for the continent.”
This article first appeared in the November 2018 print edition of The Africa Report magazine