On April 8, 2016, Ethiopian Airlines Group (Ethiopian) started celebrating its 70 years anniversary amid massive expansion of air transport services. Since its maiden scheduled commercial flight from Addis Ababa, Ethiopia, to Cairo, Egypt, 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 the times of economic recessions 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 spectators of airline industry, not a month goes by without hearing praises of Ethiopian’s strides in providing quality services and expansion of routes. In this piece, I try to present the chief achievements of the Airline, delving into the dominant success factors, and the important lessons to be drawn from such a public commercial enterprise to other state owned enterprises and public institutions in Africa.
A Resilient Airline That Thrives Even Under Tough Times
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 with regard to 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 remained a pioneering company in the industry with exceptional standards. I agree with those observers who say that the Airlines’ 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 strengths. 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 air cargo. Moreover, the company’s Aviation Academy was voted as “the 2014 Airline Training Service Provider of the Year” by AFRAA.
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 US$2.3 billion in 2013, and that Ethiopian 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 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. Ethiopian 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.
Building Vibrancy through Fleet System Modernization
One of the factors that have kept the dynamic gains of the Airlines is the probity of the enterprise in fleet system modernization. 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 aircrafts. Ethiopian has acquired a fleet of seventy-six aircrafts, of which thirty of them are for long-range passenger services, including thirteen Boeing 787 Dreamliners. In view of fleet modernization and a desired increase in efficiency, the carrier has forty-two additional aircrafts on order including eight Boeing 787s, and fourteen 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 machine. More specifically, Boeing 787 Dreamliner is believed to be an environmentally friendly super-efficient airplane; this 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 US$2.1 billion in the “largest single order for Boeing (BA) Co. planes from African continent.” In essence, acquiring new fleet systems and retrofitting existing capabilities was a key component of the airline’s 15-year strategic Vision 2025 Roadmap to expand its business to carry 18 million passengers a year. This goes for Ethiopian’s aspiration to possess as many as superior and efficient aircrafts.
A flurry of changes in markets may require an airline to reconfigure its fleet. As a result, the Ethiopian’s older generation fleets are being retired, to give placing room for injection of state-of-the-art aircrafts into the veins of carrier, to enable Ethiopian to operate one of the youngest and greenest fleet in Africa. It is expected that 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.
A Pan Africanist Airline Dedicated to Continental Integration
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 realize its renaissance. Since its founding in 1945, Ethiopian has been flying to more destinations in Africa than any other airline, and it has moved to broaden its foothold on the continent and further connected Africa to the rest of the world, by steadily realizing 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 early 1960s, Ethiopian was the official presidential airline for most African heads of state. Indeed, Ethiopian served as a facilitative dynamo for the convening of the May Addis Ababa Conference of African Heads of State in 1963, which resulted in the creation of the Organization of African Unity now the African Union (OAU/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 dedications of the governments are no just political hot air but they have made a business sense in the long term. If memory serves me, I once heard, in 2008, the then Managing Director of the Ugandan Civil Aviation Authority saying gratefully that, “Ethiopian was the only airline that has 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 the proven capability of Ethiopian, the Airline can notably contribute towards the realization of the African aspiration of having a top-notch integrative network that criss-crosses the continent, as it is rightly stated in the African Union’s Agenda 2063. In this collective vision and roadmap for deeper and greater integration of the continent, the leaders of the continent agreed that African Passport would be introduced with the abolishment 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.
Forging Strategic Global and Regional Alliances
In December 2011, this pan-Africanist airline and corporate citizen of Ethiopia 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, offering seamless travel options and giving recognition to frequent flyer programs (FFP) among other benefits. This would further assist customers to get fair price, increased air traffic volumes and frequency of services. Per 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 Ethiopian had already taken great pride in this regard. 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. But what are the measured benefits that the membership brings about? As per the analysis of aviation experts, 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, this also ensures continuous improvements in service standards and fosters a sense of pride for the country whose flag Ethiopian carries.
For Ethiopian 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 alliance 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.
Flying High through Managing Customer Expectations
The bedrock from which all these ongoing achievements are launched is the philosophy of synchronizing leadership and staff commitment, strategic vision, cost management, and customer satisfaction,. This being the case, however, it cannot be said that the challenges are not many: 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 aviation industry. In other words, to navigate through such stiff competition and while 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.
It is a widely held fact that 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 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 stakeholders to improve airports ability to exceed the ever evolving customers’ expectations. There is no doubt that excellent airport facilities and services, such as courtesy and helpfulness of airport staff, give passengers an enjoyable and ennobling airport experience. It is therefore incumbent upon the relevant airport authorities to equip the staff with professional knowledge of services and make them behave kindly and courteously to win customer trust and confidence.
An Epicenter of Aviation Academic Excellence in Africa
Ethiopian has been lauded for its actions to promote growth. Its success is partly due to its constant production and deployment of a disciplined, well-trained and patriotic workforce, ensuring the reliability of services and improvement of efficiency. Ethiopian is virtually self-sufficient in all aviation training systems. The Ethiopian Aviation Academy (EAA) offers training for pilots, aircraft technicians, cabin crew, marketing, management and finance, giving the best workforce a stronger grounding in the skills necessary to be a part of a leading professional aviation force. The airline was forced to create its own academy since there are no other institutions that can supply it with trained human resource. So, it has changed this challenge into an opportunity.
Just as Ethiopian has worked tirelessly to increase the prestige of the Aviation Academy, and consequently, clear of the perimeter, it has also provided basic aviation maintenance training to trainees from many other African countries. Rooted in the African spirit, the training is also leavened by a healthy dose of advanced aircraft maintenance base. In recognition to its application of international standard, EAA has so far been certified by the U.S. Federal Aviation Administration (FAA), European Aviation Safety Agency (EASA) and IATA Safety Audit (IOSA). As part of this robust strategy, Ethiopian signed the On-point Solution Agreement with GE Aviation for maintenance, repair and overhaul of its GE90 engines. This is certainly a recipe for a guaranteed success.
In 2015 alone, about 750 students from Ethiopia and other parts of Africa were able to graduate from the Academy in different aviation skills, and it is a clear indication that the Academy is fast maturing into continental respectability and is walking the walks towards becoming one of the seven profit axes of the company. Even more impressive, EAA aims to expand its acceptance capacity of 4,000 trainees yearly, and this will be ancillary revenue generating wing and an important income stream.
It is also cheering to know that Ethiopian has sparked aviation vocations within the female population in Africa in its bid to improve gender balance in the industry, when it underwent its first-ever flight operated by an all-female crew in November 2015.
Surviving the Storms with Prudent Cost Management
Some view that aviation industry as an economic bellwether; hence, it manifests that the health of aviation industry serves as a barometer for wider economic conditions. Recently, most airlines are enjoying relatively higher operating margins due to cost reduction led by the decline of oil prices and skilled airline management. There is no question that aviation fuel accounts for a major portion of operating costs. Some few years back, to the dismay of many airlines across the world, political instabilities that had prevailed in oil-producing countries played a big role in the rise of fuel prices, and did so for costs to the aviation industry.
Ethiopian pursues the policy of managing fuel price volatility risk using various hedging strategies and instruments based on careful examination of the trends. It has also been introducing fuel-efficient aircrafts. For Ethiopian to be a guaranteed frontrunner in the industry in the years to come, there are also other strategies that must be adopted to minimize fuel costs. One example is venturing into a joint domestic production of sustainable and advanced-generation bio-fuels or their utilization, as they are affordable and environmentally friendly. This serves the purpose of saving from rampaging, volatile and potentially rising fossil fuel prices that represent the lion’s share of airlines’ costs for national carriers of oil importing countries. I presume that this sounds much more germane to an airline whose country is not an oil producing one. Besides, the joint jet fuel purchase scheme devised by African Airlines Association (AFRAA) (of which Ethiopian is a part), Ethiopian is a kind of strategic move that can help to collectively lower fuel costs. For those who are disposed to take an optimistic view, efforts for scientific break-through to create electrically powered commercial aircrafts, may ultimately relieve Ethiopian from fuel predicament in the long-run and help crack the carbon code.
An Airline Contributing to National and Regional Economy
The contribution of airline industry to economic development is enormous. There can be no iota of doubt that Ethiopian is the much needed hard currency generating machine to its country. As we reflect on an ideal network dispensation of economic advantages other than these airfare receipts, we can also realize that better transport links expand market opportunities. This further allows greater scope for economies of scale, increased specialization in areas of comparative advantage, and stiffer competitive pressures on companies, encouraging them to become more efficient. It is evident that air transport facilitates world trade and, this in turn means aviation supports foreign direct investment, which is often accompanied by improved technology. Given the growing international economic importance of Ethiopia in the global business communities, the Airline has consistently provided seamless movement of business people into and out of the country. Moreover, based on correct reading of global economic trends, the airline has shifted its business focus on linking Africa with global growth hot-spots like China and India. Borrowing the words of one commentator, airlines are the “physical Internet”, connecting people, products and the world driving the global economy and creating millions of jobs.
There is no doubt that greater transport links speed up African economic integration to the rest of the world and expand its market. Aviation can allow effective networking and collaboration over longer distances and improve the profitability of investment in other sectors as well. In Ethiopia, for instance, building of freight capacity by acquiring more freighter aircrafts has helped the floriculture sector, which increasingly depends on just-in-time deliveries of this perishable export commodity to Europe and other destinations. To meet this growing need, Ethiopian put in place perishable cargo cold storage facility to serve the growing exports of perishable items. Industries that produce low-volume-high-value commodities such as pharmaceuticals rely on air transport for delivery of time sensitive supplies. This in turn means aviation supports foreign direct investment both into and out of Africa. That is why many countries promote aviation as the lifeblood of their economies.
Yet, in a world in which employment generation is becoming a main concern, those activities that are directly or indirectly dependent on transporting people and goods by air, including airline and airport operations, are of paramount importance. Let us relate this prospect with Ethiopian tourism sector. Given the recognition Ethiopia has got from the European Council on Tourism and Trade as “Best Destination for Tourists in 2015”, employment in the tourism industry is expected to benefit quite a bit, and this is clearly reliant on the aviation industry as most of foreign visitors arrive by air. By the same token, the aviation industry depends on tourism to generate demand for its products and services. So, it is possible that increased demand for tourism would augment the frequency of air travel. Being cognizant of the need to fundamentally change the magnitude of tourist flow to Ethiopia, Ethiopian has forged a new partnership with the newly-established Ethiopian Tourism Organization (ETO) in marketing Ethiopia as a global tourist destination for mutually reinforcing benefits.
A Well Managed Public Enterprise that Epitomizes Success
In my very limited foray into public sector economics, I can say that Ethiopian can provide a practical insight that a well managed public enterprise can be a success, and the public sector can be somehow a viable alternative to wholesale privatization. It is not most common to find a public sector success story in Africa; a business that is fully-owned by its government that is actually blossoming. One fundamental factor for its success is the fact that successive Ethiopian governments have ensured that the management of the airline is autonomous and professional with very limited but effective strategic support and guidance from political leaders.
One lesson that can be drawn from the success of the airline is that public enterprises can be very successful if and when they are run with visionary and strategic professional leadership and management and where the political leadership provides judicious oversight and strategic support rather than unduly interfering with the day-to-day operation and management of the enterprise. Other African countries can draw an important lesson from this Ethiopian experience. As a matter of fact, the Ethiopian government itself can learn from its success in nurturing, supporting and leading Ethiopian Airlines Group into spectacular success and try to replicate the success with other public enterprises in the country.
More Ingredients for Scaling New Heights in the Aviation Industry
In general, Ethiopian’s investment on performance-enhancing activities and its membership to Star Alliance do not only change its connectivity, but they also accelerate changes that have been long underway and illuminate them to a degree that will make continued advancement (that engender high brand loyalty and customer satisfaction) all the time more tenable. When the center of gravity is on aviation infrastructure development, increasing operational efficiency and service improvement, the economic payoff will be large and immediate; and in fact, many will celebrate it.
Ethiopian’s entry into strategic partnership with smaller African airlines definitely brings market enhancement and scale up of operational efficiency to all. This was demonstrated when Ethiopian partnered with Lome-based ASKY Airlines, in which Ethiopian has a stake and is responsible for aircraft maintenance and operational management. In this highly competitive sector and with economic hardship being a global reality, regional cooperation and alliances would pay off and ensure employment. The Government of Ethiopia also believes in this move and has been fortifying strategic partnership with other countries to create favorable external conditions in the diplomatic arena. Economic reasoning has taken the prominence in state affairs, and modern demands and processes are oriented towards the promotion of domestic business abroad and the attraction of foreign investors. It is therefore incumbent upon the regional players to come to a consensus and seize the opportunities that regional cooperation offers; and unleashing enhanced diplomatic machineries would excellently complement this endeavor.
For the Airline to attract more customers incessantly, it is essential that long-term and intensive marketing campaigns are unleashed based on the evolving characteristics of passengers and other partners. As Ethiopian builds its public relation apparatus equal to the overwhelming task at hand, it should acknowledge the need for additional robust corps of public relation specialists in the field, to play well in the presence of respected rivals. While that is certainly true, the emphasis on promotion in the making of successful airline should be central to the articulation of Ethiopian’s eminence as well.
Lessons of Ethiopian Experience
There is a widespread perception that many public enterprises in Africa have not delivered what was expected from them in economic development. Most of the challenges are related to rising corruption, management inefficiencies, poor performance of staff, and technological shortcomings. All things considered, it can be concluded that Ethiopian Airlines is case of a successful public enterprise. Many African public enterprises therefore can draw important lessons and successfully emulate the success factors that have made Ethiopian a shining star. First and foremost, little change is likely to come about in poorly performing public enterprises unless the recruitment of professional and competent management and well-trained and productive workforce is ensured. In doing so, it is necessary to pay greater attention to the strengthening of capacity building of their workforce and to the creation of a new culture in which competence, efficiency and the public good are dominant.
Secondly, maintaining firms’ operational autonomy and cordial and cooperative relationship with the government, is important to achieve the goals of the public enterprise. Thirdly, public enterprises should be committed to transform themselves into dynamic entities which are cost-effective in serving their customers through the application of financial discipline with proper cost management mechanisms, enhancing their ability to systematically adapt and change, and focusing on the need to maintain, rehabilitate, and modernize their physical assets. Finally, it is essential to champion commitments to work better by demonstrating creative patterns of collaboration and alliances with other enterprises in order to build networks at reasonably little extra cost, attaining economies of scale through resource pooling across operational areas.
For Ethiopian Airlines, continued implementation of its Vision 2025 Roadmap and the generation of new workable strategies would enhance its dynamic competitive advantage in the years to come. These will help maintain the current levels of its attainment and conjure up a better image of an efficient African corporate entity which is robustly positioned to continue riding from success to success, with its vitality of cherished tradition. Its predilection for creating sustained distinction is an assertion that keeps “The New Spirit of Africa” thriving more in leading the 21st aviation development in Africa.
This article was originally posted on The African Exponent on 2 May 2016
Negus Kebede is a Business Promotion Director at the Economic and Business Diplomacy Directorate-General in the Ethiopian Ministry of Foreign Affairs.