Airlines aims to double its annual turnover to $1 billion by 2010 by growing
its airline and services revenues and seeking alliance membership.
profitable African carrier, which currently has turnover of around $500 million,
is also targeting a profit of around $116 million by 2010.
plans to achieve this by deploying a 30-strong fleet, doubling its passenger
numbers to 3 million annually and by adding four new destinations.
to ATI at an event in Addis Ababa to mark the
airline’s 60th anniversary, Ethiopian Airlines executive officer corporate
planning and development Kinfe Kahssaye outlined a three-pronged strategy.
will rapidly increase its airline profitability by increasing frequencies on
“most routes”, rather than through network expansion. The airline accounts for
80% of Ethiopian’s annual turnover.
it plans to diversify and maximise its service revenues, growing its
maintenance, cargo and training to form 50% of its total turnover within seven
says the final strategic shift will come from alliance membership. Ethiopian is
in the early stages of negotiating a codeshare partnership with Lufthansa,
which it hopes could ultimately lead it to a role in Star Alliance.
firm will complement its strategy with an organisational revamp, dividing its
activities into profit centres to form self-sustaining strategic business
units. This process – covering its airline, maintenance, cargo, catering and
handling activities - has begun in some areas, but is not likely to be
completed until after 2010.
Airlines executive officer for marketing and sales Tewolde Mariam says: “At
this stage it is an evolving phenomenon. We have a plan and are determined to
go in that path. We are definitely going to restructure the company along these
lines, with strategic business units under a holding company.”
project is also underway to revamp Ethiopian’s brand and logo, drawing heavily
on its African roots and reflecting its aviation services push.
says, once this raft of changes is completed, state-owned Ethiopian may
progress towards privatisation. But he adds that this is not a priority in the
“immediate future”. Ethiopian Airlines CEO Girma Wake says it benefits from
“business-like and supportive” government relations, “without too much
the maintenance side, Ethiopian is aiming to establish itself as a key third
party maintenance provider. It will invest $5 million annually into its
maintenance activity over the next five years, and has just opened a new $8
million maintenance hangar at Addis
Ababa Bole International Airport
- which has been audited and approved as a Boeing repair station.
says: “We want to make [third-party maintenance] a major revenue contributor to
the business. It now generates $12-14 million per year. This has to grow over
the coming four to five years by three or four times.”
Airlines executive officer for maintenance and engineering Abate Digafe says:
“We are repositioning the company to go into more maintenance, repair and
overhaul work. We are working on building capability to maintain and overhaul
other aircraft types not operated by Ethiopian.”
explains that Ethiopian has maintenance capability for all of the types that it
operates, but is looking to secure approval to maintain all 737 variants and is
considering branching out from its all-Boeing remit to include “some” Airbus
accounts for around 15% of Ethiopian’s annual revenues. The airline, which
carried around 50,000t of freight last year, has invested $28 million in a new
cargo terminal at Addis Ababa.
Ethiopian claims that, with a 250,000t annual capacity, it is the largest
freight facility in Africa.
for cargo now stands at around $100 million, but that is going to grow and
within five years it will start to double,” says Kahssaye.
is also planning a $25 million phased investment to “substantially” upgrade its
training facilities for pilots, maintenance workers and aviation professionals.
airline is suffering from skills erosion as its staff take
more lucrative jobs in locations such as the Middle East.
But Kahssaye says that compensation levels will be stepped up in a bid to
retain staff. At the same time the training investment will turn this threat
into a third-party revenue opportunity for the company.
of crying when they take our people, we will boost our training capabilities,”
he says. “Our strategy is to train more aviation professionals to move on.”
is also looking to take delivery of 12 new pilot training aircraft within 18
months, having issued a request for proposals to European and US manufacturers.
which has a single 757/767 simulator, is working to acquire a modern variant
737 simulator in partnership with Boeing subsidiary Alteon.
says that the deal “should happen” within six months with a view to delivery in
a year’s time and adds the airline is “ultimately” looking to secure a 787
simulator ahead its first delivery in September 2008.
negotiations already underway between Ethiopian and Lufthansa mark the African
carrier’s first step towards joining an alliance.
are in discussions with Lufthansa, both on passenger and cargo co-operation. We
are going to work jointly at Frankfurt and Addis Ababa. We hope that will take us to the
Star Alliance, if that co-operation succeeds,” says Kahssaye.
believes that existing codeshare partner South African Airlines’ (SAA) recent
entry into Star fits in well with Ethiopian’s ambitions, due to SAA being in
the far south compared with Ethiopia’s
location in north east Africa.
would also consider Oneworld, but Kahssaye says that nearby Kenya Airways’
associate membership of SkyTeam effectively rules out the third major airline
Ethiopian’s 2005-06 financial year, which is due to
end in June, Kahssaye expects to generate a turnover of around $570 million. He
says spiralling fuel costs mean profits will be lower than the $34 million posted
last year, but adds: “We are going to make money, for sure.”