Against a backdrop of steep inflation, post-pandemic competitiveness and a changing airline industry, Ethiopian Airlines is pursuing its “Vision 2035” growth strategy.
Ethiopia Airlines is Africa’s leading airline in terms of fleet and passengers – far ahead of EgyptAir and Kenya Airways. It was one of the few worldwide to have remained afloat during the COVID-19 pandemic without public bailouts or redundancies.
Now the airline finds itself facing new difficulties in a swiftly changing landscape, as CEO Mesfin Tasew, who was appointed to the role in March 2022, explains.
According to Mesfin, the 2022-2023 financial year – which ended on 30 June – “was a very prosperous year.”
“We carried 13.7 million passengers, 57% more than the previous year and 10% more than before Covid [as well as] 740,000 tonnes of freight, twice as much as before Covid,” says Mesfin.
Ethiopia’s state-owned airline, which boasts of being the only profitable airline in Africa, generated “6.1 billion dollars in turnover, an increase of 20% on the previous financial year and almost 50% on the pre-Covid period” Mesfin says, showing that “we have fully recovered from the impact of Covid”.
Pandemic’s effects still felt
The effects of the pandemic are still being felt, stresses Mesfin, with “high inflation” worldwide that “translates into high operating costs, high fuel prices and many countries still recovering from Covid and whose economic growth remains weak”.
Like other airlines, Ethiopian Airlines is also facing a shortage of spare parts.
The supply chain was disrupted by the pandemic and has not yet fully recovered, according to the CEO. This has forced aircraft to be grounded at times while waiting for parts.
“The problem should be solved within two or three years (…) but today it’s a real challenge”.
Another problem relates to the “increased competition” as post-Covid activity picks up.
“In recent years, airlines have been struggling to recover from the impact of Covid, but now (…) most are very optimistic and have ordered a large number of aircraft”, he explains.
This “will lead to a dumping of seats on offer (…) which will lower yields and toughen competition on ticket prices. Ethiopian Airlines will have to re-evaluate its cost structure and work hard on its cost reduction plan to remain competitive”.
Discrimination accusations
On the legal front, the company is facing “discrimination” proceedings before an Ethiopian civil court.
A human rights association is accusing Ethiopian Airlines of having applied discriminatory measures against travellers from the Tigray region wishing to fly to Addis Ababa, following the two-year war that pitted the local authorities against the Ethiopian federal government.
During the conflict, the company was also accused of transporting Ethiopian army soldiers and equipment to Tigray, a charge it has denied.
Future growth
Despite the numerous challenges, Mesfin says Ethiopian Airlines is intent on pursuing its growth strategy.
The “Vision 2035” strategic plan, presented at the end of 2022, plans to quadruple the number of passengers – to more than 60 million – by increasing the number of international destinations from the current 130 to 207 and by increasing the fleet from the current 140 to 271 aircraft.
At a time when the airline industry has set itself the target of reducing its carbon emissions to zero by 2050, Mesfin says the company is “currently developing a sustainable development strategy.”
To do so, will require sustainable aviation fuels (SAF).
“Studies show that more than 60% of the reduction in these emissions will come from the use of sustainable aviation fuel” (SAF).
However, all the airlines are coming up against two problems: its availability and its price, which is two to four times more expensive than paraffin.
“Today, there are a few producers [of SAF] in Europe and the United States, but none in Africa”, Mesfin points out, and paraffin “accounts for around 40% of our costs. Using SAF at the current price would make our costs disproportionate”.
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