FlightCom Magazine 39Likewise, the airline management has
committed to make the airline successful.
I have been with Ethiopian Airlines for the
past 31 years, and during this time I have
only seen one year where the airline had a
negative bottom line. Thus, the commitment
to be successful includes the commitment to
be independent on a commercial basis. And
this requires stability.
Largely as a result of the commitment
from government not to intervene, the airline
has stable management and leadership. The
average number of years of experience
with the airline of senior management is
approximately 35 years.
Ethiopian Airlines has a board of
directors. What role does the board
play, and who is on it?
We have two heads of office. Firstly,
we have a board. The board consists of
government officials, professionals and
Ethiopian Airlines staff. On the other hand,
the airline also reports to the Minister of
Transport. Sometimes decisions first go
through the board; at other times the airline
deals directly with the Minister. In general,
involvement of the board is only with
regards to strategy – the ‘road map’, the 15-
year Vision 2025 plan, and major expenses,
such as the acquisition of aircraft. Other
than that, the board will not be involved in
day-to-day operations.
Operating in the airline industry
requires a road map, and this means
planning far in advance. In terms of aircraft
acquisition, you need to be looking ten years
ahead. The order for Ethiopian Airlines’
A350s, the first of which was delivered in
June 2016, was placed in 2008/2009.
If there is no management stability
in the airline, successfully implementing
long-term plans is not possible. If the CEO
changes every six months, how can that CEO
plan 10 years ahead? Furthermore, people
in ‘acting’ positions can only concentrate
on the short-term day-to-day activities of
the airline because they have no assurance
that they will be around in, say, 10 years’
time when strategies and decisions are to be
implemented and realised.
So, stability and development of
discipline – both within the airline to
stick to a plan, and the government not to
interfere – is key if an airline is to have an
appropriate road map and be successful.
Ethiopian Airlines has been successful,
because it understands this. Around seven
years ago, Ethiopian’s turnover was around
US$600-700 million. Currently, it is around
US$2.5 billion. Nowadays, in all parameters- in terms of aircraft, bottom line, turnover,
and destinations – Ethiopian is the largest
airline in Africa.
On a turnover of US$2.5 billion,
what is your net profit?
Our net profit has consistently been
relative to our turnover – and we all know
airlines operate to minimal margins. At
Ethiopian Airlines, our net profit is about
10% of turnover. So, in 2010, it was around
US$60 million; last year, when our turnover
was around US$2.5 billion, our net profit
was US$265 million.How many aircraft do you currently
have in your fleet, and how many do
you have on order?
Currently we have over 80 aircraft in the
passenger fleet. Ten years ago, we only had
around 20-30 aircraft. Thus, the average age
of aircraft in our fleet is not representative
of the rest of the African fleet, where the
aircraft are 20, 30, and in some cases even
40 years old. The average age of our aircraft
is around five years. Our fleet is the youngest
in the industry.
Amongst others, we have 16 777 s, close
to 20 Boeing 787s, 20 737 -8 NGs, then we
have also recently acquired the A350-900s
with a number still on order. In the next five
years, we are expecting to purchase 50-plus
new aircraft: A350s, 787-9s and 737 MAXs.How do you finance these aircraft?
60% are on financial lease, with
the remaining 40% on operating lease.
This is largely thanks to our government
ratifying and implementing the Cape Town
Convention – we were the first country to do
so. This gave us a financial advantage, as it
allowed us to get discounts on our financing.
So, as far as I’m concerned, not ratifying
the Cape Town Convention is equivalentto throwing money away every year. Since
signing the convention, Ethiopian Airlines
has had no trouble obtaining financial
leases when we go out into the market.
Furthermore, the government acts as
guarantor for the finance.
In terms of protecting ourselves against
fluctuations in interest rates and currency,
because we operate to a number of countries
around the world, we use this as an
opportunity to deal in different currencies
to build in natural hedging.Does Ethiopian Airlines receive any
government subsidies?
Not at all. There is an agreement
between the government and the airline.
Firstly, the airline has played its part.
And by that, I mean that it has upheld its
commitment, because it doesn’t receive
government support, to be profitable all
the time. And, again, the government has
committed not to intervene. So the two exist
peacefully: the government does not affect
the airline – and the airline does not affect
the government.Recently airlines in Africa, for
example Kenya Airways and SAA,
have reduced their number of flights
to Asia, whereas Ethiopian Airlinesnot ratifying the Cape
Town Convention is
equivalent to throwing
money away.