By Yemisi Izuora
The Chief Executive Officer (CEO) of Ethiopian Airline Mr. Tewolde Gebremariam
in this interview with journalists speaks on the airlines expansion plan, among wide range of industry issues, Yemisi Izuora captures the discussion’
Exerpt
How would ou assess the continents aviation sector and industry growth in Nigeria
We would like to see Nigerian aviation sector grow faster than it has been so far and to see also a very strong national carrier in Nigeria. Nigeria Airways used to be one of the best in Africa in the past. We are ready to help, partner and hopefully, the aviation policy will also be revised to support this kind of African partnership between African brothers and sisters which the continent has not encouraged African aviation partnership which has not been encouraged.
Now with the renewed initiative in the Yamoussoukro Decision, we do hope that African Heads of states who are going to meet in Addis Ababa in a couple of weeks would declare that Africa should see a single sky, single aviation policy, where African countries, carriers can cooperate to develop their aviation sector with free market to African carriers. Basically, what we are looking for in the coming meeting of Heads of States of Africa is full implementation of Yamoussoukro implementation which means that the African airspace will be treated as a single airspace, so that any African carrier would be able to fly from one point to another without any restriction in the continent.
The second one which we are pushing as African airline through the African Airlines Association (AFRAA), the Africa Civil Aviation Commission (AFCAC) which is headed by a Nigerian lady, Iyabo Sosina, to formulate an aviation policy on single market for Africa which will be like what the European community has today. Member states of European Union treat the market as a single airspace. So, they have full freedom of the air for their airlines. But when it comes to air services negotiation within member states of European Union and another country the European Union, then the European Union will act as a single market. For instance today as it is, if one of the European Union airline member country wants to fly to Africa, there will be a clause mandating the European airline to fly to that country through other European country.
For instance, British Airways can fly to Addis through Paris with Union’s community clause. They call it horizontal clause but unfortunately, Ethiopian Airways, Kenya Airways or Ari Airlines won’t be able to fly to European country through another African country which does not have an airline. For instance, if we want to fly to Paris through Chad in the existing arrangement, we would not be able to do so while Air France would be able to fly to Addis through Abidjan because it is a member country in Europe. The African Union as a bloc, the European Union as a bloc, so bloc to bloc negotiation is there to make competitive landing scale level field for everybody. Because of lack of these two policy instrument; first one is the Yamoussoukro Declaration and the second one is unfair competition in the continent and the result of it that 80 per cent of the intercontinental traffic between Africa and the rest of the world is carried by none African airlines.
Only 20 per cent is carried by African airlines and this is lopsided and it has to be corrected. In order to correct this imbalance and unfair competition is to enact those instruments that I explained before. I sincerely wish that Nigeria would lead the change because Nigeria is a big aviation market, a big country, the most populous country, the largest economy in the continent. Nigeria has a lot of ways to drive this initiative. Nigerian carriers can do more but in terms of coverage, Ethiopian Airways is doing fine. We are covering four points in Nigeria.
I have read some statement in the media from Nigeria that there are more points to Ethiopian Airways to Nigeria may affect domestic carriers. I really disagree with that. Within the context of Yamoussoukro Declaration, we should operate more to more points and facilitate the intercontinental and inter country travel hardships that we experience in Africa. If you want to travel today from Nigeria to neighbouring country in Cameroon in the East; Ghana, Cote d Ivoire in the West, passengers don’t have so many choices in terms of the availability of air routes, so, it is an underserved market. We should push for more air routes among African countries.
Your expansion plan in Nigeria
There are two ways to do that in terms of expansion. As I said before, we are flying to four points in Nigeria and we want to increase those frequencies in those two points in Kano and Enugu. We are not daily as much as Lagos and Abuja. We want to increase the frequencies to daily so that we connect the Northern parts of Nigeria with the rest of world particularly to Middle East and Asia every single day. We want to also connect the Enugu area with Asia, Middle East and Europe every single day. That is our immediate expansion plan.
We are also starting Port-Harcourt, although, it is very close to Enugu. If it is feasible, we will start it. But the second point is that we should not see Africans travel to Europe to visit their neighbour in the 21st century. This should not be acceptable to the continent any more. By this, what I mean is for instance if you want travel to Gambia today for instance, you have very limited choices. You may not be able to fly at a date that you want. So, unfortunately for some day off operations in a week, you may have to travel to Europe to connect to Gambia. I think this has to stop. Why should we fly to Europe? You fly six hours to and another six hours from Europe to travel to our neighbouring country.
This is true in the ECOWAS region. This is also true in the Eastern African region. In the bigger picture, we should b able to connect continents as much as required by air because the other mode of transport are not well developed whether it is road or railway systems are highly under developed. Air travel is the most practical and easy way of connecting passengers in the continent. If you want to connect two countries by rail, it is a huge and massive investment but if you want to connect two countries by air which almost all countries have airports today, it is very easy with very little investment you can do it but we are not doing it because we have closed the market and we don’t understand the rationale why we should close the markets and let our people suffer. So, in this line, we want to do more in connecting the ECOWAS region, East Africa, South Africa. Africans have to trust each other in terms of trade and investment.
It is only ten per cent of African trade which is within the continent. Africa’s trade with the rest of the world is 88 per cent. Ethiopia exports a lot of flowers out of Europe and a lot of African countries import a lot of flowers from Europe. This is ridiculous. The south-South trade relation has to grow. So, why do we trade among ourselves through Europe? This does not make sense. Ethiopia export a lot of meat to the Middle East but a lot of African West African countries like Gabon, Equitorial Guinea and so on import meat from Europe. Angola imports meat from Brazil, while a lot of East African countries export meat to Middle East and so on. The poor air connectivity is also driven by lack of investment among ourselves. I think we need to change. I think Ethiopian Airways would want to play a catalyst role in doubling up this trade investment and air connectivity. As you know, back in the 1960s, Ethiopian was the only airline serving East-West; no other airline. So, we have done it for more than 50 years, so we should be able to it better in the 21st century.
Is there any record of interference in the way Ethiopian is run?
This is very important question. I think African countries can learn on the ways Ethiopian Airlines is managed and the corporate governance of Ethiopian Airlines. It is 100 per cent government owned but fortunately, successive governments in Ethiopia starting from the Emperor with different ideology, political leadership allowed the airline to be managed by professionals and that is one of the main success factors of the airline.
The airline business is very challenging business, highly capital intensive and labour intensive business. It can drive how much difficult it is in terms of assets management, labour management. The more capital intensive a business is, the capital requirement of that business is high, therefore, the assets utilization is very important. You buy an airplane, you have to keep it in the air for at least 13 or 14 hours a day, anything less than that, it is difficult to make money.
The second challenge in the airline business is that there is excessive competition. There are so many airlines with so much capacity and the capacity is growing irrespective of demand or not. Too much capacity will drive yield down and therefore, the profit margin is very slim and that makes the cost of airline very high. You cannot make mistake, if you do it will be fatal. So for these reasons, airlines need to be managed professionally by aviation experts and that is the realization by the Ethiopian government and the discipline of the government by not interfering in the airline. When I mean by not interfering, they leave the daily management of the airline to professional managers like myself, but they hold us accountable for the performance.
There is a board of about 11 people with high government officials. Employees are represented in the board. The arrangement is very good. Like I said before, the airline is run professionally. Every government official here, every ministers pay for their tickets.
Are there any specific plans for 2015 not only in Nigeria but generally in terms of expansion?
In general, 2015 will be again an expansion year for us because it is part of our vision 2025. We are going to receive more than ten airplanes this year and these airplanes are time of machines that are able to fly nonstop to many routes. 2015 will see more and more of nonstop flights to the continents. It will see more nonstop flights to Asia, Philippines and Japan, are going to join our network. We will increase our frequencies to South Korea, and we will increase our frequencies to Thailand. Later in the year, we will see also resumption of our service to Singapore.
In Europe, it will be more of consolidation of what we have but we will add one point in Europe which is Dublin. In the United States, we are adding Los Angeles. These are quite long routes. In Africa, we are adding Cape Town and Gaborone in Botswana and more leisure destinations in the Indian Islands. Pretty much, it will be the same expansion if not a little bit faster. In terms of fleet, we will have some three more B787s; we will have more B777-ER, the largest airplanes in our fleet that can carry 400 people at a time and more B737s and so on.
In terms of facilities and infrastructure, we will get the opportunity to visit some of the facilities here. We have one more flight simulator for pilot trainings; the B787 simulator which is coming in March. We have the B737, B767, three Q400 simulators. They are building the B787 simulator as we speak. It will be ready by March this year. We will also bring the B777 simulator. It will be self sufficient simulators. The cargo terminal is being expanded. It is a huge cargo terminal on the Eastern part of the existing one. After 2025, there is the plan to move the airport south by the Rife valley, about 70 kilometers from Addis.
Your airline turn out profit every year when we know that airline business all over the world is tough with just small profit margin, what magic wand did you apply?
It is very hard to find magic reason. I will say we intend to do the right things at the right time because you know that success is the result of hard work. When opportunities exist in the internal world, it is up to the player to do the right thing to take advantage of that opportunity.
Early on, we convinced ourselves that we have the right location at the juncture of Europe, Middle East and Asia and we determine the trade and investment relation between Africa and Asia is growing although Europe is still the largest trade partner in Africa but in terms of growth, Asia is now moving faster, so the economic growth driven by Asia’s investment in Africa, particularly in China, India was forced to recognize and we prepared service to take advantage of that.
Today, we are the largest carrier between Africa and China; eight flights a week; a daily stop to Beijing daily, daily stop to Shanghai, daily stop to Guangzhou and daily stop to Hong Kong. You can put it to a nutshell that we are doing the right thing at the right time. I think the most important factor is internally.
The system that has been built throughout the entire year in terms of employees, skill development in terms of right motivation and in terms of the right talent. The airline has invested a lot. Our forefathers were visionaries to see this much in advance in the past to make sure that the airline is what it is today to make sure that the airline is profitable at any time whether it is $147 per oil barrel or today at $55 per barrel of oil. The corporate governance is very important. Everyone is accountable to what they do. We are very modest in whatever we do. We have strong cost saving project.
We see to the cost effective ways of doing things. Fleet decisions are very important for any airline. It is make or break for an airline. If you do your fleet decisions the right time in good time, the right way, half of the job is done. In our Vision 2025, we knew what type of fleet we want, at what price we buy them and from what machine we buy them. Machines dictate the type of fleet. We have the domestic and regional fleet which is Bombardier Q400. It is a very nice plane. Comparable to the jet plane, which is very economical. Today, we have 17 of them. Then, we have the jet range short service planes, the B737 NGs.
It is the most successful airplane in the world today. More than 8, 000 of it is in service. We are replacing the B757, B767 which have served their time with B787 which is the most modern airplane, which has 20 per cent fuel saving, faster. On a ten hour flight, you can save 45 minutes. It flies 45 minutes faster than the current…. It is high tech plane and we have ten of them in service. We have order from the Airbus family and the A350 technology is very impressive. We are going to take the delivery next year. The B777, again, the most successful airplane.
If you get your fleet in order, you cannot have all manner of airplanes that will be costly. Fleet commonality is very important success factor in the airline industry. In today’s volatile business world, it is difficult to plan 15 years in advance but we decided we should have a road map which may change but at least we have a direction.
National carrier for Nigeria to compete with other nations?
A very good question. Does Nigeria need a national carrier? The answer is yes.
Although Nigerian people are is getting services from everywhere in Europe, from Africa, the Middle East but for strategic reasons, it needs a national carrier because a national carrier is a national carrier. A national carrier serves the people in good and bad times. What kind of national carrier could be subjected to debate because you have different model. In terms of cooperation and partnership, this is my personal belief; I would say it has to be with an African carrier or an African country because we have similarity of objectives, similarity of purpose and similarity of direction. Globalisation is coming to Africa in a big way.
So, whether we like it or not, we have to join the forces. Globalisation is coming and will come in a big way and we will participate in that process. We always say that the 21st century is an African century, so Africa is going to grow, Africa is going to develop and Africa is going to attract huge FDI, but the question remains that Africa should participate and get the benefits of the fruits of development and the only way to do that is to make sure that in all sectors we have our own home grown companies in all sectors of the economy. Likewise, in the aviation sector, we should have our own home grown carriers who will employ Africans. When an international airline flies to Lagos or Abuja, how many Nigerians do they employ?
Ten, 15 but a national carrier in Africa is going to employ thousands of Nigerians in maintenance, catering, in cargo, in airport, in academy and so on. We have to make sure that Africans gets the benefits of the fruits for Africa and make sure the job remains in Africa, whether it is in Ethiopia or in Nigeria, we can always find amicable solution. Coming to your second question of whether Ethiopian Airlines will be ready to partner with Nigeria on a national carrier. Ofcourse yes. Let me take you few years back. Before we started ASKY Airlines, our first choice was Nigeria. There was no question because Nigeria is a giant. It is a huge country in West Africa; we could not go anywhere else except Nigeria.
The condition was not right and we could not succeed. We had to go to a relatively smaller country, Togo and we have ASKY but it is not too late, we can do it and we are ready and we are interested. Infact, as a matter of fact, there is an initiative by the Nigerian government to establish a national carrier and we have been invited through Price Water House. We have written a letter of our expression of interest and we are waiting for a response.
On denial of market access to Nigerian airlines by foreign airlines including ET
Nigeria is a huge country with huge land mass and the most populous country in Africa. Let me ask you this question, is the domestic market well serviced? The answer is no. Whether international airlines fly to Enugu, Abuja, Kano or Lagos, will it make a difference for a domestic market which is under served?
The other question is that at the end of the day, passengers’ convenience in terms of time saving and in terms of cost should be the concern. We all serve the customers and if the customer’s preference is to fly directly from Kano to the rest of the world, why should they be forced to go through Abuja?
The same with Enugu. Before we started Enugu, you can ask your passengers how difficult it was for the passengers to drive from Enugu to Lagos. This has helped tremendously and saved hardship for the passengers.
The question is, was there enough service between Lagos and Enugu? The answer is no. I think this question that has been raised would be more valid if the domestic market in Nigeria is well served in terms of connectivity, pricing, in terms of good customer service, in terms of convenience of transfer. If it takes a passenger to connect through international airport in Abuja or Kano and it cost much additional so much money, what it means is that there is an additional price of about $200. But today, the customer is flying from Enugu, Kano to Guangzhou like the same price from Abuja . Is not an advantage for the custome? It is all working for the customer. I think customer convenience has to take priority.