The African ‘Developmental State’ Is Truly Here With Us-It Takes The Form Of Money-Spinning Ethiopian Airlines
The Ethiopian flag carrier has made a profit 300 times more than each of ailing rivals South African Airways and Kenya Airways.
Ethiopian Airlines’s numbers are out, and they have the effect of rubbing other African airlines’ noses in it after they beat its own forecasts to leave its continental rivals looking on, largely enviously.
The Bole International Airport-based airline turned in $175 million in net profit in its financial year ended June 2015, on revenues of $2.27 billion, shooting nearly 12% past its $2 billion projections, according to chief executive Tewolde Gebremariam.
Under its growth blueprint, the carrier, which flies to more global routes than any other African airline, by 2025 expects to be generating over $10 billion in revenue.
When the dust has settled on one of the toughest aviation periods for African carriers, the airline that last year became Africa’s largest by revenue and profit would be forgiven for surveying the wreckage all around it, with a measure of both satisfaction and regret.
To put it into context, Ethiopian’s profit is more than the rest of Africa’s aviation industry combined. It is $430 million more that of arch-rival Kenya Airways, which last month booked a record $257 million loss, the latest in a streak of annual losses for the Nairobi-headquartered airline.
It is $375 million more than that of South African Airlines, which has reported a net loss of $200 million, also continuing on its losses-strewn flight path.
EgyptAir was preparing to book losses of up to $350 million according to its new chief executive, Sameh El Hefny, as the challenge of the revolution years continued to relentlessly hammer the national carrier.
Of its chief rivals on the continent, only Moroccan state-owned Royal Air Maroc had some sight of Ethiopian’s tail beacon, with a $19 million profit for its most recent financial year. Air Algerie this month reported only $95,000 in annual profit, while Tunisair remained hopeful of a small profit.
Gamely, Tewolde did not stick the boot in when asked about his struggling rivals: “I cannot comment on other airlines’ performance but I wish them the best of success and we would like to cooperate with all African sister airlines for the development of the aviation sector in the continent.”
A marriage proposal
In 2012, former Kenya Airways CEO Titus Naikuni suggested a three-way merger between Ethiopian, SAA and his company, letting on concerns that African airlines were too weak to withstand competition from bigger European and the turbo-charged African carriers.
While nothing ever came of this, Naikuni did have a point: Non-African carriers now account for 80% of travel between Africa and the rest of the world. Air France, which is in a partnership with Kenya Airways, for example flies to more than 45 African cities, including a stranglehold on Francophone Africa. The omnipresent Emirates flies to nearly 20 countries in Africa, while Qatar Airways has a sizeable 15 African countries on its roster.
With sub-Saharan African carriers lying financially belly-up, it could fall to Ethiopian to begin the fightback and rescue the regional industry’s battered pride, providing a rallying cry much like during the liberation fight of years gone by on the continent.
It certainly has every ability to do so. Last fiscal year, the carrier, according to International Civil Aviation Organisation figures, ferried 6.4 million passengers, a 3.4 % growth on the previous financial year, as both South Africa and Egypt steadily declined, and Kenya remained flat.
According to its Vision 2025 growth strategy, launched five years ago, the carrier projected flying to 90 destinations at the plan’s maturity, it now flies to 91, with 52 of these in Africa, and to another 20 domestically. It had also forecast a fleet of 63 aircraft—it is now on 76, with another 42 on order, according to its website.
But more significantly, it also has the intention. Tewolde, who has termed the red-hot numbers as indicating the carrier had “overgrown”, is now looking at adding Indonesia’s Jakarta and Vietnam’s Ho Chi Minh City, he told Reuters agency last week. In an Asia-heavy expansion that has had its rivals growing cold feet, it will also add two more Chinese cities, in addition to the ports of call of Oslo, New York and Chicago.
The carrier already flies to 15 destinations in Europe and the US, and 24 in the Middle East and Asia, providing an alternative to the buzzing Middle East carriers that have pummelled African competitors.
But while it sizes up other regions, it is also shaping up to completely dominate its home continent, even as it battles obstacles such as its African rivals’ obstinate resistance to fifth freedom rights—part of the little-respected landmark 1999 Yamoussoukro declaration. In March, the carrier disclosed that it was in talks with Nigeria, Africa’s largest and most populous economy, and three other countries to expand operations on the continent.
The Rwandair signal
Ethiopian already owns shares in Malawian Airlines and Togo’s ASKY Airlines, and Tewolde said he had also been approached by Uganda, South Sudan and the Democratic Republic of Congo for partnerships, though he gave no details.
But perhaps it is discussions with another regional airline that give a sign of how the future might look like. Ethiopian is one of two carriers in advanced talks with RwandAir, which is seeking a strategic partner.
The other is Gulf carrier Etihad, the United Arab Emirates’ flag carrier, and the country’s second largest after the all-conquering Emirates.
Last week, part of the Ethiopian prime minister’s family was in Kigali, where pictures of them, together with their father, meeting Rwandan president Paul Kagame filtered out. Additionally, former long-serving Ethiopian Airlines chief Girma Wake is now the chairman of the plucky Rwandan flag carrier’s board. As such, the Emirati carrier appears to have its work cut out in this race.
But even more telling is the sight of the region’s emergent “developmental states” closing ranks using such high profile symbols of national pride. On August 21, the inaugural Meles Zenawi Foundation’s symposium, which the Ethiopian elites were in town for, took place in an African Development Bank-backed event held in the Rwanda capital.
It was titled “The African Democratic Developmental State”. The significance is that Africa’s developmental states are moving from just sharing the same political DNA, to putting their money in the same pot, and also building institutions to propagate their world view with institutions like the Meles Zenawi Foundation.
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