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Ethiopian Airlines generates billions of dollars in annual revenue

Ethiopian Airlines was a symbol of national pride, then disaster struck

Ethiopian Airlines unveiled plans last October to build a mega-airport south of Addis Ababa. The new hub, it claimed, would handle 80 million passengers a year — the same volume as Heathrow in London.

Airlines don’t normally build airports. But the project reflected the ambition of Ethiopian Airlines, which has turned itself into an aviation powerhouse in part by acquiring stakes in the national airlines of neighboring countries.

Ethiopian Airlines generates billions of dollars in annual revenue and carried nearly 11 million passengers last year. Its fleet has grown to 111 planes, many of them new or just a few years old.

The planned airport, near the city of Bishoftu, would help the airline prepare for another round of expansion. But earlier this month, Bishoftu was in the headlines for a different reason.

Six minutes after taking off from Addis Ababa on March 10, Ethiopian Airlines Flight 302 plunged into the earth near the lakeside city, killing 157 people and putting the airline under a microscope.

An emperor founds an airline

The state-owned carrier started life as a joint venture with now-defunct American carrier Trans World Airlines (TWA), using a fleet of ex-US military C-47 Skytrains that were leftover from World War II to rattle around the continent.

As Ethiopia underwent radical upheaval in the following decades — including the fall of its monarchy, the reign of a brutal Marxist regime and a famine that killed an estimated 1 million people — the airline managed to survive.

Flag carriers from bigger African economies, meanwhile, such as South African Airways and Kenya Airways, fell into bankruptcy or financial difficulty.

Nigeria no longer even operates a national carrier.

Zemedeneh Negatu, the global chairman of Fairfax Africa Fund who has advised Ethiopian Airlines, says the key to the airline’s resilience is that it has “always been run like a business” with “no interference” from the government.

Staffed by industry experts, the airline doesn’t suffer from the same high turnover as its rivals. Tewolde GebreMariam, the current CEO, began his career with the airline in 1985.

Its home nation’s weak economy might also have been a blessing. Management has always been “acutely aware” that “if they made losses, the government was not in a position to bail them out,” says Elijah Chingosho, a former secretary general of the African Airlines Association and managing director of Ultimate Solutions Consulting.

An aviation pioneer

For decades, Ethiopian Airlines survived — but it wasn’t until the mid-2000s that it started to thrive.

In 2005, the airline made global headlines when it announced that it would be the launch carrier for the Boeing 787 Dreamliner, placing a $1.3 billion order for 15 of the fuel-efficient, long-range aircraft.

Soon after, the airline began expanding its international network with a focus on emerging economies. One major target, China, is now one of the Ethiopian government’s biggest economic partners.

Alleged video of final moments onboard Ethiopian Airlines ET302 before crush

“Everyone was belittling that strategy,” says Negatu, who was born in Ethiopia. “They now fly 40-plus flights a week to China and another 20 plus to India. Fifteen years ago, that strategy wasn’t so obvious.”

Ethiopian Airlines would later sign code-share agreements with Lufthansa, Singapore Airlines (SINGF) and Asiana Airlines. In 2011, the carrier joined the Star Alliance, which includes United Airlines (UAL), Air Canada and Singapore Airlines.

The airline also operates Africa’s largest aviation academy, where pilots, ground staff, maintenance technicians and cabin crew from across the continent come to train.

But its biggest innovation was still to come.

Africa’s closed skies

Africa’s skies remain largely unconnected.

Only five countries have direct flights to more than 20 other African nations, according to the African Union. Ethiopia tops that list with about 30 flights to destinations on the continent.

“The European market is almost entirely liberalized, meaning you can fly from one market to another without any particular restrictions,” says Oliver Clark of aviation website Flight Radar. “Africa is not like that. In Africa, often it’s quicker to fly through a hub in the European Union or Middle East. You just can’t fly direct.”

An open skies treaty endorsed by 44 members of the African Union in 1999 failed to bring about meaningful change. In 2018, an African Union initiative with the same mission was signed onto by 28 member states — but not Ethiopia. Many countries in the region continue to charge some of the world’s most expensive aviation fees and taxes.

The African Union estimates that if just 12 key Africa countries opened their markets, 155,000 jobs would be created along with a combined $1.3 billion in additional gross domestic product each year for those nations.

“A lot of these African countries are quite wedded to the idea of having a flag carrier,” says Clark. “If you open up the skies to competitors they could be seen as a threat to your homegrown airline.”

Ethiopian Airlines has pursued its own strategy: a 15-year plan to dominate Africa’s skies by acquiring minority stakes in other carriers.

In 2010, it became a founding partner in Togo-based airline ASKY. Two years later, it helped establish Malawian Airlines. It replicated the strategy last year with airlines in Guinea, Chad and Mozambique.

“It’s an extremely smart strategy,” says Negatu. Ethiopia helps its partners with expertise and credit lines for new aircraft. “Ethiopian Airlines brings its entire global infrastructure to these startups,” he says.

The biggest brand in Africa

Ethiopian Airlines is arguably the biggest aviation brand in Africa. “The rap on Africans is often that we can’t build world-class institutions,” says Negatu. “Ethiopian Airlines defies that logic. It’s a successful, billion-dollar company that competes globally every single day.”

For that reason, the crash of the airline’s Boeing (BA) 737 Max earlier this month was felt deeply.

“A lot of mothers in Ethiopia cried as if they lost one of their own children,” says Negatu, describing the company as a symbol of “what we can do and what we can achieve.”

The crash also put the company’s reputation and safety record into the spotlight. It has suffered three major crashes in 70 years.

Investigators looking at this month’s crash, however, are focusing on the Boeing 737 Max because a Lion Air flight using the same aircraft crashed in similar circumstances in October, potentially diverting criticism away from Ethiopian Airlines.

The problem of questions over its safety record is not necessarily new. “In terms of it being an Africa airline and there being an assumption that it is less safe than others, that’s an issue that it would have had irrespective of the crash,” says Clark.

“It’s about challenging long-held perceptions,” he says. “But there are plenty of airlines that have suffered accidents and have moved on. I can see Ethiopian Airlines doing the same.” ??

cnn.com

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