”Fast Growth Is Mandatory”

The national flag carrier is opening a number of new destinations and acquiring modern jetliners, including the Boeing 787 Dreamliner and B777s. However, the road has never been a bed of roses for the airline. Kaleyesus Bekele of The Reporter sat down with the CEO of the airline, Tewolde Gebremaraim, at his office and discussed the growth of the airline and the challenges facing the management. The Reporter: Tell us about the current status of Ethiopian Airlines.

Tewolde Gebremariam: As you know we are in the middle of the implementation Vision 2025 (a 15-year growth plan). The plan was considered by many to be a very ambitious one. It is a scaled-up growth plan. We started it in the fiscal year 2010-2011 and now we are in the fourth fiscal year. When we initiated Vision 2025, many people within the company and outside, including media people, said it was very ambitious. And, it is true that it is very ambitious.

But making a thorough analysis of the environment and the capability of the airline, we believed that it is achievable and should be achieved. The growth plan is very necessary for Ethiopian Airlines. People ask if it was realistic and if it was achievable. Many people say that it is a very fast growth. I think these are valid and good concerns.

But when you view the airline industry in general it is a very capital-and labor-intensive industry. As a result of a high proportion of fixed capital and labor intensity, the airline industry is always driven by volume.

Volume matters. Scale matters. And size matters in the airline industry because it is all about economics of scale. So if you have the critical minimum mass in terms of size the fixed cost is absorbed by a larger volume of output, therefore your unit cost comes down.

This is the rule that governs the industry. That is the reason why every airline, as much as possible, wants to grow. In terms of fleet you need the minimum number and composition of fleets to make the economics of scale in terms of operation and of the number of passengers. This is the very reason why we developed fast, sustainable and profitable strategy.

It is the right strategy and it is proved right. And now four years into it we have ascertained and proved that it was the right strategy and is achievable. Let me give you some figures to show where we are today. In terms of revenue (annual turnover) in 2010, at the end of the fiscal year, the airline was generating 17 billion birr this year we are going to close around 48 billion birr. This has grown by more than twofold in the last three years.

In 2010, we generated a profit of 1.6 billion birr last year we generated more than two billion birr. If you look at our fleet, we had 36 airplanes in service today we have 63 aircraft in service. In 2010 we were flying to 59 international destinations, now to 79 destinations. This has shown a tremendous growth. The number of employees increased from 5,500 to 8,000, which does not include temporary employees.

This shows you that the airline is growing fast. What makes Ethiopian Airline’s growth unique in the industry is that it is growing fast while making profit. Usually in the industry, when you are growing fast, you do not make profit at all. Look at the gulf carriers.

Take Qatar Airlines, for instance. They are fast but they have not been making profit. If you want to grow at a fast rate like 15 and 20 percent, then it is very difficult to make profit. But in our case we are growing fast and the profit is also growing. Today we are the most profitable airline in Africa. That is why Ethiopian Airline’s growth is admired and a topic of discussion all over the world.

People in the industry wonder how the airline can grow fast and at the same time continue increasing profit. We now are the fastest growing airline in Africa and also the most profitable one. There are few airlines in Africa that make profit. We are the largest network in Africa. In 2013 we received nine international awards, including the SKYTRAX Award. In the Vision 2025 plan, we focus on four pillars.

The first pillar is fleet. Again in the airline industry, if you do not have the right fleet, it is very challenging. In terms of fleet composition, commonality, fit for the purpose, you have to have the right fleet. If you have too many fleets the cost of operation goes up. If you have very similar fleets then you may not be able to cover your network. For instance, in Ethiopian Airlines we use the Boeing 737 aircraft to serve regional destinations.

We also have long haul services like Addis-Washington DC (13 hour non-stop flight) and Beijing. We have defined the fleet size and fleet composition. For short range we use the narrow body B737-800 and -700. On the mid-size we have the B767 and B757 they are gradually replaced by the B787, then on the long-rage wide body, we have B777-200 LR and the B777-300 ER. In 2016 we will start taking delivery of the Airbus 350. The fleet is determined from now on it will only be a matter of adding numbers. The second pillar is infrastructure. It is divided into two. The first is the one that we own and control.

This is cargo terminal, maintenance hangar, aviation academy and simulators. On this front, we started building one of the largest cargo terminals. The current terminal has a designed capacity of 350,000 tons per annum.

The one that we are building now has two phases but when combined it will have the capacity to handle 1.2 million tons of cargo. We have started building the first phase, which will accommodate 600,000 tons of cargo. It will cost us 150 million US dollars. For the maintenance hangar, we have two versions. The main one is a very large hangar. It has its own paint shop.

That will cost us 90 million dollars. We also have a light hangar, which is going to cost us 110 million birr. These two hangars are being built simultaneously as we speak. We have three simulators. The first simulator is for B757 and B767 pilot training. The second one is the B737 simulator. The third simulator is the Q400. Space is provided for the B787 Dreamliner simulator, which will come next year.

The other infrastructure that we are working on is the aviation academy. We have completed the construction of a large building for classrooms. The other building is approaching completion. We have invested about 55 million dollars in the aviation academy expansion project. Human resource development is the other main pillar. As the airline grows we need more professionals, more pilots, technicians, cabin crew and marketing teams.

We are investing in the aviation academy. We increased the intake. In 2010 the intake capacity of the academy was 200 students per year. Today it has an intake capacity of 1000. We are training 1000 professionals per year. That shows that we are employing 1000 people per year. The airline is creating more than 1,000 Ethiopian nationals. We are introducing new technologies like the multi-crew pilot license training program.

The fourth pillar is systems. By systems we mean information and communication technology. ICT is changing the entire way of doing business. We are investing in ICT infrastructure development. We have invested 30 million dollars. Today the airline is 100 percent computerized. In the next six months to a year’s time we will change the airline to a paperless organization. It is going to be fully automated. The other one is the multi-hub strategy.

In Togo we established a regional hub. We have invested in ASKY Airline. ASKY started operations four years ago and is a successful airline. We are replicating ASKY’s success in Malawi. Again, we will replicate that in the DRC. It is true that the airline is growing fast and this has taken many by surprise.

But there are some critics who are skeptical about the fast growth of the airline. They do not deny that the airline is growing but they are saying that it is an unhealthy growth. They say it is growing so fast that the management is putting too much pressure on the employees and is compromising quality and safety. What is your response to this?

I would say first it is a good concern. When we grow at the rate that I told you these types of concerns could arise and they are valid concerns. But we have to measure these concerns with facts and figures. Let us see the parameter. By growing so much, have we compromised quality? The answer is no. We have not compromised quality. If we had compromised quality passengers would not have been travelling with us in big numbers.

Our number of passenger is growing 15 to 20 percent every year. From one million passengers in 2005 we increased to 5.6 million last year and six million this year. The number of passengers is growing very fast because they are satisfied with our service. They are loyal to the airline and they like the airline. They are happy with the overall service of the airline. We always do a survey on customer satisfaction.

We hand out questionnaires to our customers and collect feedback. Passengers’ feedback show that 87 percent of our passengers are satisfied with our service. This is a very high figure in the airline industry. This does not show you a compromise in quality. Our passengers tell us that our in-flight service is one of the best. Our passengers tell us that our connectivity is one of the best. Today if you are in Abidjan and you want to fly to Beijing, Guangzhou or any other part of China you will not get any better connection than Ethiopian Airline.

If you want to fly to China from any part of Africa, it is Ethiopian Airlines that has the fastest and most convenient flights. We have the largest network in China among African airlines. It is the same thing with Washington. Washington-Addis is a direct flight. So our flights are full. Before three years we were flying B767s, which is a 235-seater. Now we have the B777s, a 321-seater and they are full. What does this show you?

It shows you that passengers are happy with the quality of service and they are flying with us in large numbers. For the first time in our history, we received SKYTRAX’s best airline staff award. SKYTRAX is a very conservative and credible airline rating company. We received the SKYTRAX best staff service award last June. We received nine awards and most of them are in customer service. It is the customers that vote.

All these show you that our service quality is upgraded. As you know, we joined Star Alliance in 2011. Star Alliance has its own measurement. We have 98 percent compliance in Star Alliance. Star Alliance audits our service every year. For instance, they will come next month to audit us. I am quite sure that the facts and figures I gave to you prove that quality is continuously upgraded. The other thing you mentioned is safety.

For us safety is number one. It is our top priority. We cannot compromise safety for a minute. And, again, if you consider the way we measure safety, including security, we have regulators. These regulators come and audit us. And we pass all audits with flying colors. The USS Federal Aviation Administration audits us as a certified repair station here. FAA audits us every year and we pass to their satisfaction.

European Aviation Safety Agency audits us twice. We are working with EASA on certification. Ethiopian has always been audited by FAA. Now EASA gets equal recognition and so we also want to be certified by EASA. The Ethiopian Civil Aviation Authority audits us. They audit us frequently. There is what we call SAFA audit (Safety Assessment of Foreign Airlines). All foreign airlines flying to Europe are inspected.

In 2013 we had 27 audits in Paris, London, Frankfurt, Stockholm, Rome etc. We have to make sure that we are up to the European safety standards. If we do not comply we cannot fly to Europe. Every two years we have the IOSA (international operational safety audit). The last one was in the first week of February 2014. In the last three audits we successfully passed the IOSA audit with no findings.

There are 954 standard practices and we met all of them. What does this show? The airline is passing all the national, regional and global safety audits. It shows you that the airline maintains a very high safety record. It is the culture of the airline. To answer your question, although we grow very fast, at the same time we are upgrading our systems to cope with the growth in terms of service, safety, security and international standards.

If we compromise any one of these things our Star Alliance membership will be questioned. Though Ethiopian has a commendable safety record there are some people who mention two recent incidents and question the safety issue. The first one is Ethiopian airlines B767 aircraft that was enroute to Kilimanjaro but mistakenly landed in Arusha. The second one is the recent plane hijacking by an Ethiopian co-pilot. Mentioning these two incidents, they question the reliability of the airline. What is your response to this?

Well these two incidents are very unfortunate and isolated ones. They are not related to each other and do not represent the safety standards of Ethiopian Airlines. If you take the Kilimanjaro incident, there was a miscommunication between the pilots and the air traffic controllers because there was a disabled small Cessna aircraft on the runway. That was the cause of the incident. When you see the hijacking, we have yet to hear the findings of the investigations.

But again that is a very unfortunate and crazy incident. We will see the reason. You know one person took a completely absurd action. Have you identified the reason behind the hijacking? No, we have not because the co-pilot is under Swiss custody and they have continued with the investigation and we are not part of the investigation. We have not been able to access any information. Do you communicate with the Swiss authorities?

No, we don’t because now it is a national issue between the Ethiopian government and the Swiss government. But there is a national committee formed by the Ethiopian government and we are a member of that committee. Some observers claim that there is a rift in your management. These people say your flight operations head, Captain Desta Zeru, recently resigned because of a disagreement. How much of that is true? That is completely incorrect.

I am now surprised when you ask me this question. The flight operations is always headed by flight crew. So they take office for a certain period of time. Usually pilots like to fly they do not like to be in the office. It is a different environment. So after serving some years they want to go back to their previous work. Before captain Desta, Captain Tesfaye Ambaye was head of flight operations. Captain Tesfaye served for more than four years and went back to flying.

He is still serving the airline as a senior captain. Before him was Captain Demsash, captain Kebede, I can continue listing them. So that is the tradition. There is nothing unusual. It is normal. After serving some time they ask to go back to flying. It is just a normal and a usual process. Captain Desta did a very good job for the last five years in the office but now he wants to go back to flying. A year ago he asked us to go back to flying and we told him to wait until we got a replacement.

When we got the replacement we released him. So now he is going to fly. Captain Desta worked very hard. He is a member of the management team that leads the airlines fast growth. He worked very hard to cope with this fast growth and it is a very tiresome job, so he needs rest. It is tiresome for all of us. That is a well-deserved rest.. For us it is a normal process we have been doing this for many years. I do not know how the rumor came out. I am totally surprised by your question.

They say the disagreement was caused by the speed at which the airline is growing. They also mentioned other people in your management who have dissented. They say that Ato Tewolde wants the airline to grow fast. You are pushing the airline forward hard and there are some within your management who are scared by the pace of growth. They fear that the speedy growth could affect the sustainability of the airline. We have what we call the soccer winning team.

The team has about 17 people. Every Friday we have a meeting. That meeting sometimes goes up to midnight starting at four in the afternoon. So in that meeting we discuss all strategic issues. As a team we decide together. Almost all decisions are made by this team, which is the very reason the airline managed to score such an outstanding and extraordinary performance. If you see the winning soccer team there are people one hundred percent committed to the Vision 2025.

They are young, very energetic and passionate people. I am very proud of them. There is discussion. Every year we have two schedules in the airline industry – summer and winter. Vision 2025 is a 15-year development road map. So we have an annual plan and we have two season schedules. In the annual plan we discuss many issues. It is always top down and bottom up. Top down is the blueprint – the Vision 2015. Every department takes its share from the blueprint and discuss with employees.

Bottom up is after every unit discusses with the employees and comes up with a plan. So preparing the annual plan, we use both top down and bottom up approaches. In that process there is a discussion. That discussion is a healthy discussion. If the top down or Vision 2025 plan says 25 percent growth and the bottom up discussion came up with 20 percent growth we take 20 percent. So this is a very comprehensive and detailed discussion, not only at management level but down to the employee level.

The management team is highly experienced. Most of us have been in the airline industry for 25 or 30 years. We also have benchmarks. We consider revenue per employee. We compare our revenue per employee with other airlines. We compare it with Emirates, Singapore Airline, Kenya Airways etc. We always take one from Asia, Europe, the Middle East and two from Africa. We have to be able to compete with these airlines because today we are a global airline. We are operating in five continents in 80 countries.

For instance, when we see our revenue per employee performance we are better than African carriers but we have not yet reached the standards of Emirates and Singapore Airline. This is published and distributed to all members of the management and employees. So everybody works towards that goal. Yes it is tiresome. It is a challenge. Today we in the airline industry compete globally but tomorrow every company, even the farmers will compete globally. This is so because we are in the era of globalization.

It is not a choice, we have to do it. The senior management team – winning soccer team – has unity of direction, unity of purpose, and a passion for Vision 2025. All of us spend long hours working in the office. Even on the weekends if you come to our office you see our cars lining up in the parking lot. You find all of us in the office on Saturday and Sunday, because we are very passionate about what we do. This does not show a rift. This shows you our passion. That is why we are excelling in every parameter.

Last year Kenya Airways lost 92 million dollars but we made 110 million dollars profit. Look at the contrast. How did we achieve this? It is because we have committed and passionate management and employees. Our pilots work very hard. Our technicians work very hard. They usually go beyond their call of duty to make sure that Vision 2025 is a reality. Do you have an adequate number of employees to support the airline’s growth?

Yes we do. Well you know the growth bar always goes up and up so every time we need more professionals. It is a challenge to cope with the required human and financial resources. We have to have the system and infrastructure. We have to have the right resources both in terms of quality and quantity. You have not asked me about financing, which is also a big issue. When you make hundreds of millions of dollars on infrastructure and billion of dollars on fleet, finance is certainly a big issue.

Human resource is also an issue. The good competitive aantage Ethiopian Airlines has is that the airline has had its own training school since its inception. A good number of pilots and technicians come out of the academy and join the workforce every year. The ultimate aim of the academy is to support other African airlines. Today we by and large use the academy for our own consumption. As we speak today we are supporting the entire maintenance of Rwanda Air.

We have taken the entire maintenance contract of Cameroon Airline. We took the entire contract of ASKY. We have around 100 technicians working in different African countries. During an interview we had three years ago we were talking about the dearth of technicians. Supporting the airline itself was a challenge. Now we are sending technicians to work in other African airlines. The partnership among African airlines is appreciated but it also benefits our employees because they are paid in dollars.

So it is a win-win situation. To answer your question, since we have enough number of employees we are supporting other African airlines. We maintain the presidential fleet of Equatorial Guinea, and Cape Verde. We support Malawi Airlines and we are discussing with Mozambique Airlines. When it comes to pilots, it is a challenge. We have 552 pilots. It has been a couple of years since Ethiopian Airlines started hiring foreign pilots. It is very recently that most people realized that there are foreign pilots flying Ethiopian aircrafts.

Recently, you started hiring foreign cabin crew. Can you explain why you are hiring foreign nationals? And why they are paid more than their Ethiopian colleagues. It has been eight years since we started hiring foreign pilots. It is the growth that prompted us to hire foreign pilots. The growth strategy started in 2005 with Vision 2010. We were in a dilemma. At that time we wanted to grow. It was necessary for our survival. We are not growing for the sake of growth. I want to make sure that the public understands us clearly on this point.

Growth is a mandatory necessity for our survival. If we do not grow we shrink, if we shrink we will be dominated and swallowed by the big carriers and we will be history. We do not want that to happen. Ethiopian people do not want us to do that. The Ethiopian government does not want us to do that. So it is in the interest of the airline, the public and the government. Every Ethiopian here or abroad is proud of Ethiopian Airlines. When an Ethiopian sees the Dreamliner or B777 flying high in the sky heshe feels proud because the airline is wining the global completion. By any measurement we are the largest carrier in Africa.

Have you surpassed South African Airways and Egypt Air?

If you take the domestic service out, yes, because their domestic market is huge. How did we achieve that by growing very fast. Is growing fast a cake walk? No it is not. It is a challenge. But are we achieving it. Yes we are. We have every reason to believe that we will continue achieving it. When we started Vision 2010 in 2005, we knew that a resource gap was there.

We did not have enough pilots. So we started hiring pilots from the international market. By the way, this is common in the airline industry. Kenya Airway has foreign pilots. South African Airways has foreign pilots. Turkish Airline, which is growing fast, has foreign pilots. It is globalization.

Talent movement is a common practice. People work wherever they feel comfortable. Ethiopians go abroad and others come here to work. Our aim is not to depend on foreign pilots. Our aim is to depend on Ethiopian pilots. But in order to fill the gap today we have continued hiring foreign pilots. But this is temporary. Look at the proportion. Today we have 552 pilots and 85 percent are Ethiopian pilots. Only 15 percent are foreign pilots. We have 1364 cabin crew and out of that we only have 18 foreign nationals.

They are francophone from West Africa. The reason that we hired them is that we have a shortage of French-speaking cabin crew here in Ethiopia. It is very difficult to get French-speaking cabin crew in the number we want. We even tried to bring French instructors from the Alliance and the Lycee Guebremariam School.

And we are conducting class for our cabin crew but again we have a very large operation in Francophone Africa West Africa, and Paris and Belgium. Right now we need Portuguese-speaking cabin crew for our Brazil, Mozambique and Angola operations. We need Chinese cabin crew for China operations and are now recruiting a few Chinese cabin crew. It is based on actual necessity.

In terms of payment, it is not proper to discuss salary in public in the media. In general salary depends on seniority, on the type of aircraft they fly but if you compare our senior pilots and the senior pilots that we hired from abroad the pay of our senior pilots is not less than what the foreign pilots earn. A recent news report that appeared in a local newspaper asserted that Ethiopian pilots, technicians and flight attendants are leaving the airline in large numbers in search of better pay.

Is this a serious problem now? Number one, that is not correct. Let us see what staff turnover looks like at Ethiopian Airlines. As I told you earlier, in this competitive global aviation industry, talent is highly mobile. The average staff turnover is 10 percent per annum. If we see Ethiopian airline turnover, it is only two percent. The global average is five times higher than Ethiopian Airlines. It is very low. Two percent is for all employees. If we take pilots it is even less than that. In 2013, only six pilots left the airline.

Three of them retired because they reached the legal retirement age. There is nothing we can do. Only three of them left for better opportunities. So in one year, three have left out of 552 pilots. So I leave to you the final judgment. What is your final message to the public?

Ethiopian would not have been where it is today without the support of the Ethiopian people. The airline belongs to all Ethiopians. We are assigned to manage it for some time. The airline will continue to grow. So I call upon all Ethiopians, wherever they are, to continue supporting their national flag carrier.

Source : The Reporter

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