BusinessNorth AfricaEthiopian African CEO of the Year warns of challenges ahead

Tue,02Sep2014

Ethiopian African CEO of the Year warns of challenges ahead

Ethiopian Airline's chief executive Tewolde Gebremariam proves a state-owned carrier can turn profits in difficult times.

 

Gebremariam has warned that coming competition from Chinese airlines will force the need for consolidation among African carriers.

Speaking in the CEO Dialogue on the second day of the Africa CEO Forum in Geneva, Gebremariam, who was awarded African CEO of the Year at the inaugural Africa CEO Awards last night, said Chinese carriers have been busy serving their domestic market, but have their sights set on Africa.

"Consolidation will come, because small African carriers will find it very difficult to survive the competition," he said.

Gebremariam said that African governments and the African Union needed to do more to support African carriers, who make up only 20% of airline traffic on the continent. "At least it has to be fair share, 50%," he said.

He said good cost management, efficient aircraft utilisation and a good route network, helped Ethiopian Airlines to stay in profit, while its competitors South African Airways and Kenya Airways are struggling.

In the 2011-12 fiscal year Ethiopian made an operating profit of 1bn birr ($55m) and a net profit of 732m birr ($40m).

Despite reduced demand across the industry caused by the European economic crisis it hauled 25% more passengers than the previous year and, in the third year of its 15-year development plan, is growing according to schedule.

Gebremariam also pointed to good corporate governance and no interference from government, which owns 100% of Ethiopian Airlines.

"I think it's a good role model for all of us," he told the audience of African CEOs. "The fallacy is that whatever government owns is a failure. It is not."

He contrasted the Ethiopian government's choice to let the company run autonomously with the problems encountered by some of the continent's former state-owned carriers such as Nigerian Airlines, Ghana Airways and Air Afrique, which have now closed.

He said West Africa's Air Afrique was particularly challenging: "It's very difficult to be owned by 11 countries, and 11 transport ministers."

Gebremariam spoke about the stellar growth of Ethiopian Airlines, which has increased its fleet from 14 airlines eight years ago to 55 today. It runs flights to 43 countries in Africa, and a growing international network, including 28 flights a week to China.

It was the first African carrier, and second in the world, to start flying the new Boeing 787 Dreamliner this year, and now plans to buy more planes outright.

Gebremariam said that while the company now owns 50% of its planes and leases the other 50%, its goal is to own 60% within the next few years.



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