‘Why Foreign Operators Control over 80% of African Air Travel Market’

Esayas WolderMariam Hailu is the Managing Director of Ethiopian Airlines’ International Services. Hailu heads and directs development, coordination of sales, services and operation of all international flights and field office of Ethiopian Airlines Group, coupled with its activities, policies, procedure, plans and programmes. As a former country manager of the airlines in Nigeria, its biggest market till date, he understands the Nigerian aviation industry quite well. Recently at its headquarters in Addis Abba, Hailu spoke on the giant strides of Ethiopian Airlines (ET) with perspectives and advice for the African and Nigerian aviation industry, among other sundry issues. WOLE OYEBADE was there. Excerpts:

How will you describe your experience in Nigeria and operations of Ethiopian Airlines (ET)?
First, let me say that Nigeria has the largest population in Africa and you could see the vibrancy in the population and in the aviation sector. It is also the largest aviation market on the continent of Africa. The people I met are very friendly and knowledgeable. Even those that have not gone to school; the market women, are very interesting. When I lived there, the nick-name the market women at Bar Beach gave me is Baba Ijebu. That is my name because I bargained well-well. I don’t go for supermarket but open vegetable market and they called me Baba-Ijebu.

That is an embodiment of Ethiopian Airlines’ strict corporate governance and prudence in cost management and in everything. The rule is, there is nothing to be wasted. And that is the basis of our success. Those people that are prudent in cost management are rich people. To throw yafun-yafun is not always good; we have to be very careful in cost management.

On ET, we are the first national carrier in Africa since 1945. There is no nation in Africa, without Britain, Belgium or France at that time. We started with the route to Cairo and the rest of Africa in the 1960s, because Ethiopia is Pan-Africanist. Whenever the French and the British leave, ET goes to land there. We came to Nigeria in the 60s and that makes us to serve the great country for more than half a century now.

ET used to be a member of the League of Nations before the Second World War; the only black voice representing the entire black humanity on the continent, and the senior founding member of the United Nations, right after the World War. So, Ethiopia has this civic duty to the home continent to decolonise it in the diplomatic forum and when diplomacy fails, Ethiopia will send tropes to go and fight like it is the case of Zimbabwe and South Africa.
We have always served Nigerian market in passenger and cargo operations since the 60s. Even when there were several military coups and unrest, ET has never suspended its operations and has always connect Nigeria with the rest of the world and intra-Africa as well. So, we are always partners and the partnership is very big. Now we are covering five gateways: Lagos, Abuja, Kano, Kaduna and Enugu.

The way I see it, Nigeria has all what it takes. Talking less of the natural resources, the biggest endowment for Nigeria is the human capital. It has young, vibrant, well-educated, versatile and energetic people in different parts of the country and that can beat any challenge whatsoever that the 21st Century presents. We are looking forward for more win-win partnership in time to come.

As regards ET’s vision 2025 to be Africa’s leading airline that you have already achieved eight years to go. What are those things that aided accelerated achievement of this goal?
The number one contribution for the success and meeting of our own goal and even beating it, is having a clear strategy and matching order. It not vague. Where we are going tomorrow, we are already planning for it today, talk of infrastructure, fleet planning, human resource management, systems and procedure. Whatever we have to plan for tomorrow, we do those things today. These are our pillars. In terms of human resources, we are recruiting and have opened the largest Aviation Academy in Africa that is recruiting pilots, flight engineers, cargo and logistics, aviation finance, marketing and sales hands among others. For system and procedure, ET is adapting SAP system integrator. We have clear system and procedure for everything to reach that vision 2025.

Number three is fleet planning. We have been planning much earlier with negotiations with Airbus and Boeing, bringing the right size fleet to launch all the destinations we have been planning to go. And also the human management, anchored on performance, training and fulfilment for our more than 12,000 employees. Like I said earlier, our strict corporate governance, which precludes and disallows any kind of mismanagement. Also, the government is not intervening any whatever we do. Though ET is 100 per cent own by the government, but the government has given 100 per cent autonomy to the senior management of ET to conduct the business without any interference. These factors have been very helpful in achieving and to beat our plans for the future.

How imperative is the open sky policy for the growth of aviation in Africa and ET’s operations?
Africa is one continent and people are talking about African union. The open sky for African carriers has already been ratified and agreed by individual African governments. Some have applied it while some have not. So, when we have that challenge of blockage of traffic right in some places in Africa, what we do is to surmount it with bilateral negotiation with that particular country. Some of the African countries will grant free skies to other airlines coming from overseas countries, but will not give it to their own fellow Africans. Because of that, as I’m speaking, more than 80 per cent of African traffic is operated by non-African carriers. All African airlines put together, we have only 20 per cent share of the African market share. It is very unfortunate.

To ensure that African traffic is defended and distributed to African airlines, that is why we are establishing regional carriers like Asky in west Africa, Malawian hub and in discussions with numerous African countries so that they can integrate the regional traffic. We do traffic feeding with them, such that when they are of size to fly overseas, we leave the traffic for them. That way, we try to stimulate Africa’s energy to defend Africa’s traffic for African airlines. So, Yamoussoukro Declaration (open sky policy) is very important and whoever has not been doing it, it is time for them to come on board.

Having gone through your extensive facilities, what is your vision for the new cargo session that is due to open in the next couple of weeks?
Africa has a lot to export to the rest of the world. There is fresh fruit produce that we are ready to carry to the Middle East, Asia and Europe. So, we are also preparing our cold facility store. By way of import too, Africa imports a lot of technological things like mobile phone equipment, computer and automotive parts among others. For those, we are trying to attract a lot of Foreign Direct Development (FDI) like LG and Samsung to have their own regional logistic hubs in Ethiopia because geography also allows them to come directly here.

We have the largest network in the history of Africa aviation with more than 55 destinations on the continent. We also have cargo and full freighter capacity, be it B777 LR. So, with that we want to distribute to the rest of Africa and also take the African produces to the rest of the world. That way, Africa will not only be an importer but also an exporter and the balance will be okay. ET will also want to play its role as the new spirit of Africa. For that, we need to have 800,000 tonnes of cargo capacity per annum. That is why we built that facility.

The insurance premium paid by African airlines is quite on the high side. How has ET been able to tackle that challenge considering the fleet size of over 90 aircraft on its account?
Insurers are always there accessing their own risks. Risks are based on past experiences and safety standards. So, for any African operator to have a palatable insurance, we Africans need to build our capability of safety records, by way of safety assessments, accident prediction and our aviation facility and safety equipment need to be of world standard. Once it is done, people would be comfortable to cover up with acceptable expenses.
That is exactly what ET is doing because the safety area of aviation is over-regulated. There are Safety Audit of Foreign Airlines (SAFA), European Aviation Safety Agency (EASA), Federal Aviation Administration (FAA) from America, International Civil Aviation Organisation (ICAO) among others, all regulating safety. All of them come every year to Ethiopia to review our facilities and renew our safety licences every year. But that has not come easily because we have to live safety on daily basis. It all boils down to meeting the safety requirement. Once safety is guaranteed and the professionals are all in place, then insurance will be a small thing.

ET carriers about 8.8million passengers yearly. How much of this comes from local operations?
Originating from Ethiopia and going to rest of the world is about 30 per cent. 70 per cent is passing through Addis Ababa.

How do you attract investment into aviation given that your economy is conservative and government don’t interfere with your operations?
ET does not expect any cash injection from the government. It does all its expansion and financing from its own bottom-line. Of course, we have different financiers like Exim Bank of China, America and Europe and all those that supply aircraft and other equipment. When they see that ET’s profitability year after year is a success, they try to chip in and we get finances from them. We are paying back the principal and the interest without any default so far.

How much is aviation contributing to your Gross Domestic Product (GDP)?
Aviation contributes to Ethiopian GDP not more than six per cent. Because Ethiopia is predominantly an agricultural society. Three-quarter of the economy is built by agriculture. Then, one-quarter is from financial industry, manufacturing, aviation and emerging tourism (that is now one million visitors a year).

What advice do you have for airline operators in Nigeria if they must operate more efficiently?
Not all the routes in Africa are profitable but the routes have little contributions to overall traffic. For one, all the routes in Nigeria are loss making but they have network contribution because we have the largest number of passengers from Nigeria. Second is that, whatever you lose on one route, you subsidise it with other. So, we serve the entire continent as one piece. That is our strategy. Without Nigeria in our network, it just doesn’t work because that is the largest population and the people are very mobile.

Because there are many airlines there competing in Nigeria, the share is very low and the operating expenses in West Africa, particularly in Nigeria, is very high. But the entire network contribution is very good. Plus, we have that civic contribution of ours. We started with the tag line of bringing Africa together, that was 72 years ago. Now, having established the vastest network in Africa, we have succeeded in the civic duty. We are now linking Africa with the rest of the world. Our new commercial tag line is ‘the new spirit of Africa’. Why new? Because people perceive Africa as the place of conflicts and problems. Now, Africa is an emerging economy with one billion young population endowed with natural resources and ready for FDI. So, the new spirit is entirely different.

Maintenance Repair and Overhaul (MRO) facility is very important because aviation without MRO is incomplete. Aircraft has to be maintained. It has A checks within every cycle, then B and C checks that are deeper ones. If we depend on others for our maintenance, then they will charge us arms and legs. It is not going to be sustainable. We need to be self-sustaining when it comes to maintenance. That is why ET has its own MRO and maintain all its aircraft in Addis Ababa.

Not only that, it also maintains for the Gulf and African carriers. ET is not just an airline but an aviation group, having its own airline, cargo, domestic network, maintenance, catering and ground handling. We have both forward and backward integration. There is a choice for any business; make or buy. For ET, we choose to do it in an integrated way because we are an aviation group that do all the services ourselves and also for others, including the trainings.