Airline Economics Growth Frontiers Dubai 2017 (ME and Africa) Tewolde Gebremariam Ethiopian Airlines Group CEO
Ethiopian Airlines Past, Present, Future
The Leading Airline Group in Africa
Ethiopian History Bringing Africa Together for More Than 70 years Formation of the Ethiopian Airlines Group The Leading including the Airline Group in EAE 2017 Africa 2017 1 st jet service in Africa 1 st scheduled 2016 1 st African flight to Cairo B777-200LR Over 100 with DC-47 international 2012 destinations 2011 Major new infrastructures. 2010 - Biggest Catering facility 1st Flight to - Biggest MRO facility 2009 China - Biggest Cargo Terminal 1 st East-West Africa’s 1 st B787 Africa flights 1998 Africa’s 1 st A350 1973 Vision 2025 1962 Star Alliance Africa’s Largest Aviation Transatlantic flight Member Academy to NYC, IAD 1960 1946
The Largest Airline Group in Africa Global Alliance Star Alliance Member Passengers - 8.8 mil. Passengers (2016/17) Cargo (Tons) - 338,846 tones (2016/17) Revenue USD 2.71 Billion (2016/17) unaudited Current Fleet 92 in service & 60 in order(less than 5.0 years av. Fleet age) Hubs: Addis Ababa, Lomé, Lilongwe Management Team Young but highly experienced team with combined aviation experience of 425 years; average services of 25 years. Current Destinations - Over 100 international destinations. (Passenger & Freighter) - 39 Freighter and 19 domestic destinations Employees - More than 12,000 Ownership - 100% Ethiopian Government Weekly Flights + 1681 – Weekly flights + 240 – Daily departures Major Accreditation/ Certifications
Growing, Modern & Young Fleet Average fleet age of less than 5.0 years In Service: 19 - B787-8 4 - B777-300 ER 92 6 - B777-200LR 5 - A350-900 in service 6 - B767-300 9 - B737-700NG* 60 16 - B737-800W* 19 - Q400* on order 6 - B777-200LRF 2 - B757-200F * in total with partner airlines On order: 30 - B737 MAX 8 19 - A350 4 - 787 – 9 5 - Q400 2 – B777F
Record Success Vision 2025 Ethiopian is the Fastest Growing African Airline 1219% revenue growth in 10 years time in an industry which lost billions of Dollars
Record Success Vision 2025 Ethiopian ranked 57 th of the top 100 airlines group by revenue in 2016; up by 6 points (63 rd in 2015) • South Africa Airways…60 th • Egypt Airways……………76 th • Kenya Airways…………..100 th
21 st Century is African Century • 1 billion young population • Large land mass China • 6% GDP growth next Decade • GDP of $ 2.6 trillion by 2020 • 60% of world’s uncultivated arable land; destination for food security • Fast growing middle income society • Untapped natural resources: 42% of world’s gold; 12% oil; 90% diamond, etc… • Major FDI destination
ETHIOPIA, One of the PINEs (Philippines, Indonesia, Nigeria & Ethiopia) fastest growing economies Growth & Transformation Plan (GTP) • GDP: + 11% • Infrastructure development: - Road : 64,500 km - Rail : 2395 km - Energy : 10,000 MW - Telecom : 50 million mobile users • Addis : 1 st city rail in Sub-Saharan Africa to have city train service built by Shenzhen Metro • Significant improvement in human development index • Broad based & all inclusive economic development
The Largest International Passenger Network in Africa Oslo New york Antananarivo Victoria Falls Windhoek 6 Billion people living with in 10 hrs flight radius of ADD 5 Continents, More than 100 International Destinations of which 55 are in Africa
Largest Cargo Operator in Africa 6 - B777F 39 Freighter destinations in 4 continents, 6 wide-body freighters and 2 Cargo Terminals
Largest Cargo Operator in Africa Terminal 2 Upcoming Cargo Terminal No 2. • Automated Cargo Terminal for 600.000 tons per year; expandable to 1.2 mil. • Pallet racks for 8500 positions. • Meat Hanger System • X-Ray, CCTV, Forklift trucks, etc. • Half of the terminal capacity for perishables • ULD Handling System: • 4 15ft Elevating transfer vehicles • 990 10ft storage positions • 30 Workstations, elevating, with integrated scales
Gender Equality All Women Functioned Flight
Recent Major Industry Awards Recognition Of Our Success Voted the Best Cargo Airline of the Received ‘Airline of the Year’ Ethiopian Airlines has won Airline Year from Africa at the 2016 Cargo Award by the African Airlines of the Year Award for the fifth Airline of the Year awards Association (AFRAA) for the Ethiopian has won SKYTRAX World Airline year in a row, at the 48th AFRAA fourth year in a row. Award for The Best Airlines in Africa on June Annual General Assembly held in 20, 2017 at the Paris Air Show. Victoria Falls, Zimbabwe. Won the Passenger Choice Awards for "Best Ethiopian Airlines has won SKYTRAX World Ethiopian Airlines has won the CAPA ET received “Best Airline to Africa ”, Airline in Africa" for the third time in a row at Airline Award for Best Airline Staff in Airline of the Year Award at the 2015 for a second year in a row, and “ Best the Oregon Convention Center in Portland, Africa , for the second time, on July 12, CAPA Aviation Awards for Excellence, Airline in Africa ” by US Premier USA 2016. Helsinki, Finland. Traveler magazine
ET Hub (ADD Bole International Airport) Expansion & Modernization
ET Hub (ADD Bole International Airport) Expansion & Modernization
The Airline Operating Environment Unpredictable Turbulent Highly dynamic Too sensitive to economic cycles
Airline Profitability in 2017 European American Airlines Asian-Pacific Airlines 7.4 B Airlines Middle East Airlines 15.4 B 7.4 B -0.1B 0.4 B African Latin American Airlines Airlines 0.8 B
Africa : Airline Industry Major Challenges • Persistently high; about Oil 1 50% of operating cost Taxes & • Governments milking 2 aviation Charges • Limited & unable to Infrastructure 3 keep pace
Africa : Airline Industry Major Challenges • Too little inter-Africa traffic Lack of Integration • Too little trade & investment 1 among African countries ICT • Poor ICT infrastructure 2 No visa waiver among African Immigration 3 countries Tarnishes image of entire 4 Blacklisting African aviation
Key Success Factors In Airline Business Five Forces Affecting Airline Industry Profitability THREAT OF NEW ENTRANTS LOW ENTRY BARRIER Liberalization, Aircraft lease options, outsourcing BARGAINING POWER OF BARGAINING POWER RIVALRY AMONG EXISTING SUPPLIERS OF BUYERS • MONOPOLISTIC SUPPLIERS AIRLINES • INDIVIDUAL POWER • OEM’s, Fuelers, GDS, Caterers, • Internet, Travel Agencies, • Competing for growth, market Airports Concentration, Excess share, etc… capacity THREAT OF SUBSTITUTES • High speed Train • ICT products
Key Success Factors In Airline Business Fleet Fleet is the most expensive strategic asset of an airline and hence important focus areas are; o Fleet Planning o Fleet selection, commonality o Fleet management and maintenance Marketing Plan ------> Network plan ------> Fleet Plan ------> Business Plan. Financing fleet should be part of the fleet plan and business plan. o Finance lease o Various forms of operating lease Fleet Deployment; The right aircraft for the right mission.
Key Success Factors In Airline Business Cost Management Focus on cost management is a necessary but not sufficient condition for any type of airline (Full service network, LCC, ULCC or hybrid etc…). Need for continuous pursuit to achieve the least possible unit cost is necessary in all types of airlines. Cost Management should not be the domain of LCC, ULCC or hybrid airlines. Full Service Network Airlines management should also give equal attention to cost management in all product types.
Key Success Factors In Airline Business Leadership/Management The late Peter Ducker said Management is the single most important part of any organization. Determines success or failure of any organization. The commitment, dedication, passion, energy and experience and skill of Airline management is the single largest success factor for the airline. Corporate Governance Another maker and breaker of any airline. State ownership, private ownership, mix structure of ownership are all possible practices but in the end what matters most is the operating environment created as a result of the ownership. A healthy involvement of governments is unavoidable and necessary in the airline business. Depending on the economic development stage of the country, Airlines are strategic assets for any country and long term view of the business is critically important. Airline business not an easy money making business; it is an extremely low margin business.
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