Since taking over as Chief Executive Officer of Ethiopian Airlines in 2011, Tewolde Gebremariam has been busy overseeing Vision 2025 – an ambitious 15-year strategic – programme that calls for Ethiopian to become the largest carrier in Africa, with a USD 10 billion annual turnover and four hubs to cover the four corners of the continent.
These are some tough targets, but progress has been in the right direction. In 2013, Ethiopian became the largest African carrier by revenue and profit according to IATA, with revenues topping USD 2.3 billion – the first time in its 69 year history the Ethiopian flag carrier has overtaken rival South African Airways.
Capital’s Teguest Yilma talked to Tewolde while he was attending in New Delhi the first Star Alliance Chief Executive Board Meeting (CEB) hosted by Air India (who joined Star Alliance group in June this year) about his company’s vision. Excerpts:
Capital: What does Air India joining Star Alliance mean for Ethiopian Airlines?
Tewolde Gebremariam: It means quite a lot because India has a big global aviation market, in fact the fifth largest. The connection between India and many African nations is not as strong as it used to be and with Ethiopian Airlines now serving both New Delhi and Mumbai daily and India being a big subcontinent with many domestic connections that are critical, Air India joining the group has increased that much connectivity for passengers. Now you know, passengers connecting from any part of India, like Mumbai, New Delhi, and other regions can access 49 destinations in Africa, it’s as simple as connecting to any flight from anywhere to everywhere.
Capital: How has Ethiopian benefited from joining Star Alliance?
Tewolde: Network wise, there is quite a lot of benefit because we have 84 destinations in five continents and a lot of this growth has occurred over the last eight years. Star Alliance has more than 18,500 flights a day to 193 countries to 1,321 airports, so that gives us the coverage that we would not be able to have on our own, no matter how fast we grow. Simple things like connectivity bring enormous benefits. There are 27 Star Alliance members and we all share costs. Last summer we started operating in terminal 2 of Heathrow Airport (London) so that all Star Alliance members are in one terminal there and it’s the same thing in Beijing; and this brings cost-sharing advantages. Joint sourcing is another initiative. The exchange of mileage is a huge benefit for our customers because they can purchase tickets from different member airlines with miles earned on other airlines. They can also upgrade and purchase free tickets and that is a huge advantage to our customers. For gold members, being able to share lounge space globally is a big advantage. You can wait for your flight in any Star Alliance lounge whether it is in New York or Washington or LA or London or Frankfurt, you can use the lounges of any member airlines.
Capital: Ethiopian is recording a very fast growth which in a way forced the expansion work that is currently being undertaken on the Addis Ababa International airport. What about the new airport project planned at a lower altitude so as to maximize aircraft performance? Any development in that area?
Tewolde: Let me put it this way, the airlines has been growing very fast but the infrastructure has to grow along with it. Three years ago, we sat down with the Ethiopian Airports Enterprise, and we formulated a vision for 2025. This involved estimating the number of passengers, aircraft and daily departures and we determined we needed to expand the airport capacity. The first phase, which started a couple of months ago, was to expand the ramp. In Addis, the ramp has been expanded to accommodate 51 airplanes at one time. That was a major project that will be completed in the next 3 years and that will enable Addis Ababa Bole terminal to accommodate 22 million passengers compared to the seven million now.
And if you compare all the Star Alliance member carriers now, you will not find an airport that is as high in altitude as in Addis. That is a huge penalty for an airline; on average you lose about 10 tons per flight. If a 787 takes off from sea-level and from Addis, the difference is 10 tons. Higher altitude also increases engine maintenance, because the higher the altitude it puts a lot of pressure and stress on the engine. Hence building a new Airport is necessary but is something that will happen in the future.
Capital: What does this loss represent financially?
Tewolde: Just relocating the airport will save us about USD 84 million a year. We are looking for an airport location around Mojo that is on level land and right now we are forming a team of all stakeholders to plan the project.
Capital: Do you have an idea of when that could happen?
Tewolde: I think the first thing will be the study team’s recommendation, so I would expect the team to submit its recommendation in the next 3 months.
Capital: Ethiopia has a great tourist potential which has not really been tapped. And with the fast growth of the airline and plans to triple passengers in the next couple of years, what is Ethiopian doing to attract more tourists? And how is ET Holiday’s performance in the last two years?
Tewolde: As you know, this is a new initiative, we want to depend on the entire tour operator network in Ethiopia, and we are, but we want to complement that initiative as we work with each and every tour operator in Ethiopia, to generate enough tourist flow into Ethiopia. We have also decided to do our own operations, which is ET Holidays. It has been growing in the last couple of years and now we have many countries already signing; we have partners in the US, UK, Germany, and it’s still growing. As you say, Ethiopia has so much tourist-potential that it has not made use of. So it’s time now to do so with the growth of the airlines, because tourists will find it easier to visit Ethiopia from all over the world with the direct flights available now. Ethiopia’s international image has improved, so we expect the flow of tourism and investment to increase, but we need to drive that to increase the rate.
Capital: Djibouti has plans to work with Ethiopian Tourism Authorities to have tourists visiting Ethiopia to continue on to Djibouti. Do you think that association will have a positive influence?
Tewolde: I think Ethiopia and Djibouti can complement each other because Ethiopia doesn’t have a beach destination. Diving for European tourists is very popular in Djibouti. So, a regional combination could work, especially not only with Djibouti but with Kenya and Tanzania as well. Ethiopia is more of a historical, cultural, natural and to a certain extent wildlife destination. But Djibouti has scenery and the combination can attract more tourists because they can visit two countries, and also there are quite a significant number of marine bases because they are guarding sea transport who could visit Ethiopia. It’s in the early stage but I hope we will form a very good partnership.
Capital: Any development regarding Ethiopian’s hotel as well as office headquarters building projects?
Tewolde: The hotel is already under construction. We’ve also finished the contracts for office construction. The contractor is a Chinese company, Avic and the Exim Bank of China is financing the project with USD 65 million, but I don’t remember the exact figure.
Capital: Ethiopian has recently set up hubs in Malawi and Togo and you are planning to open a similar hub in Juba, South Sudan; what is the status with that project?
Tewolde: We have signed a Memorandum of Understanding (MOU) with the South Sudanese government and we are going to own 49 percent of the carrier to be established and the South Sudanese government will own 51 percent. That modality has been agreed on and more details have to be negotiated. As soon as we finish the negotiations we will start the work, but peace and stability in the nation has been a big issue.
Capital: Is the Ebola crisis a big challenge for Ethiopian?
Tewolde: The last 3-4 months has been though on the continent’s airlines, for all of us, because unfortunately the western media has exaggerated the issue. Only three nations are affected by Ebola on the western coast of the continent: Liberia, Sierra Leone, and Guinea. But unfortunately, somehow because of the media influence, the perception in the rest of the world is that the continent has been affected. So because of this people limited their travel to Africa, whether for leisure or business, and many conferences were cancelled.
Capital: How much was traffic to Africa reduced by this?
Tewolde: In terms of revenue reduction, we saw about USD 8 million loss per month. But now things are improving, the countries that are highly affected, especially Liberia and Guinea, are also doing better in terms of controlling and containing the disease. So, we expect traffic flow to increase again.