Excerpts: Many need not look past Ethiopian to name the best airline in Africa; while others simply call it one of the best few in Africa. Ethiopian has made a mark as Africa's world-class airline that epitomizes the innate capacity of an African airline to compete and flourish. One of Africa's finest, Ato Girma Wake, who has led the sustenance of the Ethiopian brand in the past over half-decade, here elucidates on the inner workings of the frontline carrier, as he readies to pass Ethiopian's helm to his successor early 2011. Ato Girma spoke to Aviation Business in Addis Ababa, recently

Q : At the beginning of your administration, what were the major challenges that Ethiopian Airlines faced?

A: When I took up my post as CEO some 6 and half years ago, Ethiopian Airlines was facing multifold challenges. The main challenge that the airline faced and which was a real threat to the airline was its limited operational activity and capacity. These limitations still persist but are being gradually addressed with the acquisition of aircraft, and the expansion of the reach and density of our network.

Given the stiffening competition in the industry in general and in our area of operations in particular from established European carriers and emerging Middle Eastern airlines, it was imperative that we implement a fast growth strategy while at the same time increasing our profitability.

You can imagine how daunting of a challenge this can be. But we managed to pull it off through the successful implementation of our five years strategy, VISION 2010.

Over the last five years, we grew by more than 20% annually, tripling the number of passengers we carried and doubling the volume of freight and increasing our revenue by close to 400%.

This is a remarkable achievement. Internally, the biggest challenge we were facing and which was directly linked to the increased competition in the industry was the departure of some of our critical staff, pilots and technicians, to the Gulf carriers. Fortunately, we have managed to considerably slow down these departures over the last years, through, among other things, a carefully crafted salary adjustment program and various employee motivation schemes.

Given that the airline industry is not only a capital intensive but also a skilled manpower driven industry, the departure of critical staff, such as pilots and technicians, posed a real threat.

Though this threat has subsided, it does not mean that it has disappeared altogether. We will continue to remain vigilant and devise the appropriate responses.

Q : ET has consistently defied the generalization that state-owned airlines do not work. Can you give an insight into the working of the relationship between ET and Government?

A: ET and the Government, which is our sole shareholder, have an excellent working relationship. There is a clearly defined role for the Government as our sole shareholder and as the regulator of the industry in the country. Firstly, as the sole shareholder of ET, the Government through The Board headed by H.E. Ato Seyoum Mesfin supervises the activities of the management, approves our budget and evaluates our performance regularly. Secondly, the Government is also the regulator of the industry in the country and, in this respect, it controls, through the various technical bodies, whether we are operating in line with the country's laws and international rules. What I want to emphasize here is that the Government strictly respects the management autonomy of the airline, which is absolutely indispensable for the success of the airline and has been one of the key ingredients of our success over the last years.

For its part, ET, which operates like any international carrier, private or public, seeks first and foremost to provide a reliable service and increased air connectivity to the country. We understand that we play a very important role in the country's development process and have been doing our part to promote the flow of tourism and investment into the country and to serve as the country's export vehicle, especially for such perishable items as horticultural products and meat.
We have been extremely fortunate that for the last couple of years we are operating in an environment where the Government is pursuing a successful developmental agenda centered on the promotion of exports, which have witnessed a phenomenal growth. Equally, the Government's policy aimed at expanding the country's infrastructure has boosted the flow of tourism into the country, which is only at its infancy but has a bright prospect ahead.

So all in all, we have an excellent collaborative relationship with the Government, as we are both working towards a similar objective.

Q: You came from another organization to head ET; but your successor is an internal executive in the organization. Would you say that this is an indication that ET has built a successful succession plan for the future?

A: I am not an outsider to ET.  I served this company for 27 years in various management positions before I left. I re-joined ET six and half years ago. Definitely, one of the areas of focus over the last couple of years has been human capital development. Equipment is important but equally as important is having the right management and technical staff. In this respect, we have done a lot to better equip our managerial staff. We have put in place management training programs at various levels of the company and have been developing built-in succession schemes at all levels of management. Just to give you an indication, since we put in place the program which was initiated by Ato Tewolde, the current CEO-Designate, we have trained over 555 managers. Our aim is to further scale up this training program in the coming years. We have gathered the financial resources required to strengthen our Aviation Academy, which we are planning to make the premiere institution of its kind on the continent. This is essential in order to scale up our fast and profitable growth in the next 15 years.

This we hope will assure the availability of qualified management, operational and technical staff in sufficient numbers to guarantee the growth of the airline.

Q: How do you compare the work culture in your early years with that of ET today?

A: The work culture between my early years and now has, of course, changed because ET has changed and society in general has changed. You cannot expect to have the same work culture in a company that has a couple of hundred employees and a couple of thousands of employees. But there are factors that have never changed. There is today as there was then the same sense of ownership of the airline by the staff. This is the great strength of our company and which we must absolutely maintain even as we grow. Our employees are deeply attached to ET and genuinely feel that it is their airline. That is why they put all their energy into the success of the company and why they stay during their entire working life. We continue to remain a family, united by our deeply shared attachment to our company.

Q: What would you consider your lowest point at the helm of ET?

A: Undoubtedly, the lowest point came in January of this year with the accident of ET's flight in Beirut. It is something that you can never be prepared for fully. Words cannot express the great sorrow and anguish I and the entire ET family felt over the tragic loss of our passengers and beloved staff aboard that flight.

Q: ET had been a single airplane-type operator on the Boeings especially on the international flight until you recently ordered the Airbus A350XWB. Is this an indication of the direction of future ET fleet renewal?

A: As I mentioned earlier, we have been over the last years on a fast growth trajectory. We have also devised and started to implement, as of July of this year, our 15-year scaled-up growth strategy, which we have dubbed VISION 2025. Fleet planning is, of course, a critical component of this strategy. As you said, we have been solely operating Boeing fleet on our international routes up to now. We have and are extremely satisfied with our decades' long partnership with Boeing. It has been a mutually beneficial partnership. It is a partnership that will be continued well into the future, as we plan to increase our capacity substantially. Having said this, our fleet strategy is part of an overall strategy of ensuring our path towards becoming a mega African carrier in the next 15 years. Our fleet renewal strategy is, therefore, aimed at purchasing aircraft, Boeing, Airbus or if another major aircraft manufacturer comes along, that will, from a cost-benefit analysis perspective, enable us to successfully implement our growth strategy. We believe by 2016 our fleet size will be large enough to allow for diversification. Hence the delivery for the order of 12 A350XWB starting in 2017.

Q: ET has built some partnerships across Africa. How successful are these partnerships?

A: We believe that it is absolutely essential for African carriers to strengthen their cooperation. This cooperation can take various forms. It can be experience sharing, availing of training, code-sharing or equity partnerships. This is the only way we will be able to build a truly African aviation industry.
Since its establishment and the start of its training facilities, ET has sought to cooperate with other African countries. We have been and continue to provide training for pilots and technicians from all over Africa.
More recently, we are participating as an equity partner and by providing management and technical services to a regional West African carrier established in Lomé called ASKY. ASKY, which started operations at the beginning of this year, is doing very well and is gradually feeding our international network through its Lomé hub. The establishment of regional hubs is an area which has a lot of promise given that the African market still remains largely untapped.

Lastly, our application to the Star Alliance has been recently announced and we are currently undertaking the necessary preparations to become a full member of the Alliance before October 2011. Egypt Air and South African Airways, two of the biggest African carriers, are already members of the Alliance. We already have a code share agreement with South African Airways. We are in discussions with these African carriers and others within the Alliance about partnerships and working together to develop the African market. I am convinced that partnerships in Africa have a bright future ahead.

Q: ET does not fly to many destinations in North Africa and North America. Is there any reason for this?

A: You are right that we have limited destinations in North America, where currently we only fly to Washington D.C. and in North Africa, where we only service Cairo. But this will change soon. We have plans to start flights to Toronto as of next year and we are studying the possibilities of operating to another American city, probably in a Southern US city.

Furthermore, per our 15-year strategy, we plan to add destinations in North Africa. It is not the lack of interest that is the reason for the limited number of destinations in these parts of the world. It is not also for market-related reasons. I believe the market is definitely there. Rather, it is due to fleet limitations. But as we gradually grow our fleet size, we have 5 B777-200LR, 10 B787, 10 B737-800 and 12 A350WXB on order; we will be in a better position to venture into these markets. Some of these aircraft, such as B777-200LR, B787 and B737 will start arriving this year and will alleviate the current capacity-related constraints we are facing.

Q: You have been an advocate of greater implementation of the Yamoussoukro Decision (YD) and some say it actually favours big African airlines like ET in its current form. Do you support the call to review the YD?

A: The YD aims to liberalize the African air market for African carriers. Though many countries profess allegiance to it, its implementation has been slow and as a result, the growth of the African aviation industry has been stifled. I think that before we talk of big African carriers, we need to carefully examine the reality of the African market. The reality of the African market today is not one in which we can talk about big African carriers.

The African international market continues to be dominated by non-African carriers. Non-African carriers account for two-thirds of the African international market. This situation is getting even worse because in addition to the established European carriers, you have now the aggressive penetration of Middle Eastern carriers into the African market. Even North American carriers are strengthening their presence in Africa. In this context, a fragmented African market, in which African countries continue to put barriers on the operations of the fellow African carriers, will continue to serve the interests of non-Africans, who will maintain their dominance over African skies. We have to be clear on what we want. On the one hand, African countries loudly proclaim the need for economic integration on the continent, but on the other when it comes to taking concrete measures of integration we see hesitation or even apprehension.

A liberalized African air market per the YD is in the interest of all African carriers and is part and parcel of the continent's integration process. We do not have to invent the wheel. We need only look to what Europe is doing and how the liberalization of the European skies has benefited European carriers and consumers. Africa should do the same.

Q: Many have projected Africa's air transport to grow faster than world's average but there is a pervasive opinion that this growth favours western carriers? What would you say about this?

A: AThis is precisely what I am saying. The African market is largely untapped and will grow above industry average for the foreseeable future, especially given that there is a lot of room for the growth of African economies. In the current legal framework of bilateral restrictions, this growth will benefit primarily non-African carriers, which overwhelmingly dominate the market today. African countries need to undertake two things to change this predicament. Firstly, they need to speed up the implementation of YD and secondly, they will have to strengthen their cooperation. Ethiopian Airlines is showing the potential long-term benefits of such cooperation through our partnership with ASKY. Others will need to step up to the plate. The pooling of our resources in Africa can ensure that the projected growth primarily favours African carriers..

Q: A number of African airlines have placed orders for new aircraft, yet many are not doing the same. Would you say the rate of new aircraft acquisition is good enough for the continent to meet its air transport obligations and play effectively in global aviation industry?

A: Indeed, a number of African airlines have placed orders for new aircraft. Some of the aircraft orders are quite impressive and the aircraft manufacturers need to acknowledge the significant market that Africa represents. The list of airlines that have modernized their fleet is long - suffice here to mention a few, namely South African Airways, EgyptAir, Ethiopian Airlines, Kenya Airways, Royal Air Maroc, Afriqiyah Airways, Libyan Airlines, Tunis Air, LAM Mozambique Airlines, Precision Air, TAAG Angola Airlines and Air Seychelles. Since the African continent is one of the few areas with good growth prospects, aircraft and other suppliers need to facilitate the modernizing of African fleets through availing financing and avoiding the imposition of higher costs since the continent has largely adopted IOSA and many countries have acceded to the Cape Town Convention.  There are some airlines that are not renewing their fleet and are still utilizing the aging and fuel-inefficient aircraft. Apart from the higher fuel costs, these old-generation aircraft create adverse impact to the environment not only in terms of greater emissions but also the noise signature. The reason for these carriers not renewing their fleet is largely due to lack of financing because of their small size and small markets. AFRAA has consistently advocated the consolidation of the industry since it is a huge challenge for the small carriers to survive in a highly competitive operating environment. All in all, we are gratified by the new aircraft acquisitions although we still see a lot of room for improvement particularly among the small carriers.

Q: In your opinion today, what are the major challenges facing the African airlines industry?

A: The African airline industry is confronted with multiple challenges. Of course, it is facing similar challenges like other airlines outside the region, but there are also distinctive or specific challenges. Like the industry in other parts of the world, it is confronted by increases of oil prices over the last years, even if there was a temporary respite during the recent global economic downturn; rises in navigation and related fees as well as GDS costs, financing constraints for the purchase of aircraft or for keeping-up with state-of-the-art technologies and lack of sufficient talent.

In case of the African industry per se, some of these challenges are more pronounced and are compounded by other difficulties such as insufficient cooperation between African carriers, foreign dominance of African skies, insufficient infrastructure in terms of serviceable airports, adequate inland transportation services to/from airports and ancillary services like groundhandling, maintenance and others.  These are some of the daunting challenges which are impeding the growth of the airline industry in Africa but which can be overcome through concerted action by all African countries and carriers.

Q: You are the president of AFRAA and recently it was said that the Secretary General resigned due to disagreements with the Executive Committee. What really happened and how do you advise the incoming President on moving AFRAA forward?

A: AFRAA is the most important tool African airlines have to collectively promote their interest vis-à-vis the rest of the world. It is our collective voice and needs to be strengthened. A weakened AFRAA means a weakened African airline industry. I believe that all African carriers understand this and are working towards this aim. My only advice, if my advice is sought, is to always keep in mind the bigger picture and not get distracted by minor disagreements and work hard for the attainment of the common good of the African industry.



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