A modern fleet of aircraft and growing customer base is making Ethiopian Airlines feel sky high. Now the arrival of the first Boeing 787 Dreamliner which made its maiden flight by circling Africa’s Mount Kilimanjaro has made flying more exciting than ever. However high jet fuel cost and competition from Gulf based air carriers remain significant challenges. Capital’s Elias Gebreselassie talked to Tewolde Gebremariam CEO of Ethiopian during the maiden voyage to Mount Kilimanjaro about the significance of the Dreamliner aircraft’s arrival and Ethiopian’s future strategy as it ascertains its status of one of the most prominent airlines in Africa.
Capital: What does Dreamliner mean in terms of flight destinations and customer service?
Tewolde Gebremariam: As you can see it has many new features for passengers. There is more headroom. It is spacious. There are more baggage compartments and other numerous benefits to the customer. The Dreamliner has more speed than other commercial planes and could be used to open up more non-stop flight destinations; for example direct to Chongqing and Shanghai in China eliminating the need to go through Guangdong and Hong Kong. Other destinations in our plans are Kuala Lampur in the south-east Asian country of Malaysia and Sao Paulo, the commercial hub of Latin America’s biggest country, Brazil. While it allows us to open long haul routes, it is also cost effective because the composite makeup of the airplane allows it to reduce fuel consumption by twenty percent. It is less susceptible to corrosion meaning it is easier to maintain through a digitized system while at the same time being inexpensive. Finally the arrival of the Dreamliner airplane is perfectly in line with the Ethiopian vision 2025. Presently with the coming of four more Dreamliners by the end of 2012 we expect new flight routes to be opened with these airplanes in Washington D.C. and Guangdong, China. For Sao Paulo, since we will pass through the West African country of Lome, Togo, we plan to assign Boeing 777 airplanes.
Capital: What motivated you to spend such a fortune on the Dreamliner?
Tewolde: We were willing to spend so much on the aircraft because, as you know, the existing technology before this was Boeing 777 which has been in service for more than 20 years now. There has to be an introduction of a new technology. It is like the case of the I-pad or the I-phone; the way they are taking over all other technologies in communication and mobile computers. It is evident in aviation technology that the next stage has to come. The way Boeing conceptualized the Dreamliner was so attractive, it made us confident that they would come up with a new technology and they did. As you can see this airplane is completely different and one stage ahead of the existing technology.
Capital: You recently secured USD one billion in financing from J.P. Morgan Chase & Company along with other financial institutions for 10 Boeing B787-8- Dreamliners.
Tewolde: Well the financing was a little bit complicated, 85 percent of the financing was guaranteed by the export-import bank (EXIM) of the US. The US giant financial firm J.P. Morgan Chase & Co. financed 85 percent of the loan. Twelve and a half percent of the financing was covered by a group of financial institutions including ING Capital, the Emerging Africa Infrastructure Fund (EAIF), The Netherlands Development Finance Company (FMO), the ICF Debt Pool LLP (ICF) with the balance covered by our own expenses. It will be a 12 year loan; so we will have to work hard to pay it back with interest.
Capital: What stage is the construction of the maintenance hangar currently in?
Tewolde: The design for the construction of the maintenance hangar has been finished. It is now in the soil test stage. We expect the construction to consume about USD 95 million. A Chinese firm named, Avec (Aviation Industry Corporation of China) is expected to start the construction soon. Maintenance is expected to be done on the Dreamliner airplanes, up to now the most modern airplane, 777 airplanes, 747 airplanes and other types of airplanes; so we expect it to be multipurpose.
Capital: You also have an agreement with Airbus for the delivery of A350 airplanes. Is it currently in service in any part of the world and when do you expect it to be delivered?
Tewolde: Currently no airline is using the A350 airplane. We expect its delivery to occur in 2017. It has been a little delayed. Its technology is not substantially superior to Dreamliner but its size will be larger.
Capital: At a recent air show held in Farnborough, United Kingdom, the World Airline Awards ranked Ethiopian airlines seventh among African carriers and customer service received low marks, what is your take on this?
Tewolde: This ranking is a mistake, we even told them about it. We had invited them to audit our airlines but they wanted to conduct the audit after the arrival of the Dreamliner, which subsequently was delayed for quite a while. They agreed to audit and check us based on what Ethiopian currently has and in effect if you go to their website the airlines has a better customer rating from its passengers. Previously we passed out papers to our customers to get their feedback but now evaluations are placed in each customer’s seat. In a recent poll 87 percent of our customers; out of the 4.8 million people who travelled with us, expressed satisfaction with our service, giving us a mark of very good and above, while only 13 percent was below that mark.
Capital: Ethiopian airlines has a 40 percent share in West African air carrier ASKY. News about the air carrier has recently quieted down after an initial flurry; what is its current status now?
Tewolde: It is progressing well. ASKY has three 777 air planes and two Q-400 airplanes. The air traffic has been increasing around 20-30 percent annually. Their load factor is very good right now and for a new air carrier that is very satisfying. However regarding revenue they’re still in the red and it is in the initial stages of diversifying routes.
Capital: What is happening with your plans to introduce hubs in Central and Southern Africa?
Tewolde: Regarding a southern Africa hub, we’ve already written to the Zambian president about our intentions, and they’ve expressed their willingness to do this. But we’re waiting for a go ahead signal and the progress, regarding this particular hub, depends on their speed of response.
Capital: What about the expansion project at Addis Ababa Bole International Airport?
Tewolde: If you have seen the eastern side of the airport, we’ve constructed a new ramp that can accommodate up to 24 airplanes. On the western side there is construction that has already been finished for a new ramp that can accommodate 14 airplanes and we are also expanding the terminal.
Capital: What makes Ethiopian grow and prosper unlike most airlines in the world?
Tewolde: My personal belief is that governance is the number one factor. It is vital. By this I mean that although Ethiopian is 100 percent government owned the government doesn’t interfere in the day to day operations of the air carrier. So we the management run the airline professionally as a purely business enterprise and we have full autonomy to run the airline, while at the same time being accountable for what we do. This makes a lot of difference. In other African countries government intervention is the problem; again that’s my belief. Wisdom and prudence of the management, especially with regards to cost is another huge part of our success. You can’t be lavish and luxurious in the airline business because the profit is narrow. Finally our employees are very dedicated. Ethiopian airlines employees work as if they’re working in their own house. They take ownership over their role in the airlines because they have aligned their lives and careers with the company and they have to make sure it succeeds.
Capital: What challenges do you expect in the future?
Tewolde: The price of oil, the shoddy infrastructure found in some African airports, the disparate nature of regulation. Even though the Yamoussukuro Declaration on New Air Transport Policy in Africa, signed in 1988, agreed that African countries would open up their air-space, many countries have yet to implement their commitments from that declaration. This issue is a major reason why the share of African Airlines is only at around 20 percent and that 80 percent of the air traffic in the continent is covered by non-African air carriers. Training and retention of our human resources is another concern and in this respect Ethiopian is doing a good job.