high ambitions

Ethiopian Airlines: “We want to become Alibaba’s official airline”

By Rémy Darras

Posted on June 1, 2020 05:13

Future Addis Ababa airport, expansion of fleet and network, diversification… In spite of the crisis, the CEO of the continent’s leading airline remains focused on his objectives and, strengthened by increasingly privileged links with China, has great ambitions.

Tewolde GebreMariam, the CEO of Ethiopian Airlines, describes himself as “very combative” at the moment.

After the ordeal of the Boeing 737 Max crash in 2019, it is the coronavirus crisis of “unprecedented magnitude” that Ethiopian Airlines and its CEO are facing.

The company has continued to fly to China, the epicentre of the epidemic, while most of the major players had interrupted their flights. Its cargo planes have appeared on screens around the world for having participated in the “war effort” against the epidemic.

READ MORE Ethiopian Airlines gambles brand equity by continuing to fly to China

On the tarmacs of many African airports, but also in Spain, Italy and Portugal, it was one of the first to deliver sanitary equipment from China.

It demonstrates a flexibility in the temporary reconversion of its activities. This does not spare it from the difficulties affecting the entire air transport sector, but rather encourages it to continue the diversification of its activities begun some ten years ago.

While it is unaware of the date and extent of the recovery, Tewolde GebreMariam is maintaining his course.

Ethiopian Airlines: Crisis and communications

It remains to be seen whether, in an African sky where victims are expected to be numerous, Ethiopian Airlines can be the architect of the sector’s reconstruction.

Your airline lost 500 million dollars between January and April. How much has it lost today?

Tewolde GebreMariam: They are not financial losses but rather a loss of earnings, because our planes are grounded. This is what we would have generated if we had operated at full capacity. We can estimate that this shortfall amounts to $1bn as of May 15. We do not know the extent of our losses. Our fiscal year will end in June.

You said there would be no layoffs. Is your cash flow holding up?

Indeed, there were no layoffs. We’ve been able to pay salaries because of our strong financial equilibrium. The last few years have been profitable. The strategy of diversifying our activities into cargo, maintenance and hotels is proving to be the right one, as it is helping us to get through this period. We are taking full advantage of it.

READ MORE Ethiopian Airlines to China: last international carrier standing

As soon as the passenger transport business came to a halt, we were able to turn to cargo and maintenance. We doubled our cargo capacity, we converted 20 passenger aircraft for cargo [which will return to their original configuration after the crisis] in addition to the 10 Boeing 777s and two Boeing 737 Cargo aircraft that we had. We will continue to expand in this segment. This will allow us to generate cash until the passenger business resumes.

You announced on 22 April that Ethiopian Airlines was “fighting for its survival”. Will you appeal to the State if your situation worsens?

We have embarked on a very strict cost-cutting programme. I never said I would appeal to the state. To date, we don’t need them. We are working hard to manage the crisis with our own resources. But if the situation worsens, we will look at other options, such as restructuring our debt, borrowing money for liquidity. It is very difficult to know whether the recovery will be slow or fast.

You said in March that China supports you as it supports its own carriers. How far does that support go?

Beijing decided to help all the companies that had continued to fly on its territory because the air transport sector is going through an unprecedented crisis.

READ MORE Alibaba’s Jack Ma, Paul Pogba mobilise against coronavirus in Africa

This is a very limited support from the Chinese government, of a relatively modest amount, which depends on the number of flights, the seat capacities deployed.

Both the WHO, headed by your compatriot Tedros Ghebreyesus, and Ethiopian Airlines have been criticised for being too close to Beijing. How do you respond to these criticisms?

They are perfectly unfounded! It is true that China and Ethiopia have very good economic and diplomatic relations. We have been flying there since 1973, when that country was not as open as it is today. But we do not understand why we should be the only ones to be criticised, when other Asian companies, such as Singapore Airlines or Thai Airways, and Middle Eastern companies, such as Emirates, have continued to fly there.

Have you had regular exchanges with the head of the WHO?

We followed the WHO’s recommendations. We sometimes spoke to each other, exchanged ideas… Tedros Ghebreyesus is doing a very good job!

Your Vision 2025 plan was completed seven years ahead of schedule and you were in the process of preparing Vision 2035. Are you going to revise your ambitions for the network, the fleet…?

We will not change our long-term strategy because of a crisis that we think is temporary. We have 60 or so aircraft on order. Some were due to arrive in 2020, others in 2021.

READ MORE Ethiopian preliminary crash report says pilots acted correctly

Their delivery has not been suspended but postponed.

Are you maintaining your order for the Boeing 737 Max?

We have not yet decided or known the fate of this plane. It is still pending. We have very good relations with Boeing, as we do with Airbus.

You still have plans to build an airport that will be able to handle 100 million passengers. But won’t the traffic forecasts you were relying on become obsolete?

The crisis has caused delays. We are all more or less in a state of containment. We are going to approach operators, manufacturers… No matter how long it takes to recover, it will come anyway: we will definitely return to normal. So we need to prepare ourselves. Our long-term strategy remains unchanged.

On the other hand, we are very optimistic that traffic between Africa and Asia may recover faster than with the rest of the world. We want to increase the number of our cities served and our frequencies in China. The traffic of African merchants, who make up the bulk of the customers on these lines, will be there.

Will you introduce in your cabins physical distancing, which can’t help profitability?

This measure has not been validated. We are awaiting the adoption of a common standard by the International Air Transport Association, which has not been very favourable.

There have been discussions between Ethiopian and the South African authorities to relaunch a new flag, as well as with Air Mauritius. At a time when many African airlines are weakened, do you intend to play a role in a certain consolidation?

We are not in discussion with the South Africans. Because we are focused on managing the crisis.

But when we are ready on both sides, we will sit around the table. There are no active negotiations with Air Mauritius, but there is a willingness to discuss.

Similarly, we are not discussing with Kenya Airways. On the other hand, there are ongoing exchanges with Air Madagascar. We are already present in the capital of companies in Chad, Togo and Equatorial Guinea, and we provide technical assistance to Camair-Co in Cameroon.

Do you intend to go further?

In our Vision 2025 plan, we wanted to extend the hub system in Africa: this objective is still on the agenda. Our current strategy is not to take shares in all these carriers but to help them as much as we can. We want to promote solidarity among African airlines and between governments.

Before consolidation, we need to strengthen and build strong companies, both regional and national, to increase their market share while creating economies of scale. About 80% of traffic in Africa is owned by non-African companies. Our immediate strategy would be to increase the share of African players to 50%. Our aspiration in Africa is for a dynamic, African-owned and -managed airline industry.

You worked with Alibaba and the Jack Ma Foundation to deliver sanitary equipment from China. Alibaba has made Addis Ababa, after Kigali, its second hub on the continent. Is this an alliance that is destined to last?

We want to become Alibaba’s official company in Africa. Alibaba is the most important e-commerce platform in China and has the ambition to position itself as an African platform.

We want to cooperate. It’s a natural fit. We have the most extensive cargo network, the largest fleet, the largest cargo terminal, the most interconnections. Alibaba can reach any African country from Addis.

Asked about Qatar Airways’ ambitions in Africa after its purchase in December of 60% of the new airport in Kigali and its willingness expressed in February to take 49% of Rwandair, Tewolde GebreMariam said: “It is a new form of competition that is emerging. And, potentially, Qatar Airways is a big competitor. From Kenya Airways to Egyptair to South African Airways, we have never lacked competition in Africa. It comes from all sides and is changing at a rapid pace. We are not afraid of it. That’s the way life is.”

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