Ethiopian Airlines is planning further fleet and network expansion in 2015, enabling the flag carrier to widen the gap with other leading African carriers. Ethiopian has already become the largest airline in Africa based on fleet size and could overtake South African Airlines (SAA) in 2015 as the largest based on passengers carried.
Ethiopian has doubled in size since the beginning of the decade while most other major African carriers have grown only slightly or not at all. Asia and Africa have been, and will continue to be, the primary drivers as Ethiopian taps the booming Asia-Africa market.
Ethiopian plans to launch services to Tokyo in Apr-2015, which will become its 11th destination in Asia. The carrier will also add its second US destination in Jun-2015 as service to Los Angeles is launched.
Ethiopian Airlines carried 6 million passengers in FY2014
Ethiopian is one of only four airlines in Africa with over 5 million annual passengers. It is also one of only four airline groups with a fleet of more than 50 aircraft.
Ethiopian Airlines poised to surpass EgyptAir and SAA
The other three African airlines that have at least five million annual passengers have recorded virtually zero growth over the last six years.
As a result Ethiopian could soon become the only African airline with 7 or more million annual passengers – if not in FY2015 almost certainly in FY2016.
This is a remarkable achievement given that SAA carried three times as many passengers as Ethiopian in FY2008. EgyptAir and Royal Air Maroc (RAM) were also more than double the size of Ethiopian in FY2008.
Ethiopian Airlines grows much faster than rival Kenya Airways
But perhaps the best comparison is between Ethiopian and its biggest rival, Kenya Airways. Kenya Airways was slightly larger than Ethiopian in FY2008, when it carried 2.8 million passengers.
It has pursued a similar strategy to Ethiopian, expanding in Asia and regionally within Africa to leverage the ideal location of East Africa for Asia-Africa flows. But Ethiopian’s expansion in Asia has been much faster and its pursuit of Asia-Africa transit passengers is much more aggressive.
Kenya Airways currently has only four destinations in Asia compared to nine for Ethiopian Airlines. Ethiopian also has eight more regional international destinations in Africa – 45 compared to 37 for Kenya Airways, according to OAG data.
As CAPA previously outlined, the new non-stop option should be able to improve Ethiopian’s performance in Singapore as it will open up one-stop connections to Australia and New Zealand and offline destinations in Southeast Asia. Unlike Ethiopian’s other Asian gateways, Singapore has limited local traffic to Africa but can be used as a hub for offline traffic leveraging Ethiopian’s partnership with Singapore Airlines (SIA).
Ethiopian also began codesharing with All Nippon Airways in Oct-2014, a sensible move ahead of its launch of services in the Japanese market. Ethiopian has been building up partnerships with Star members since joining the alliance at the end of 2011. In Asia Ethiopian also codeshares with Asiana and Air India but does not currently work with Thai Airways, which leaves SIA as its partner for Southeast Asia, Australia and New Zealand.
Ethiopian to take three more 787s in 1H2015
The new non-stop service to Singapore, launch of Tokyo and upgrade of Hong Kong to daily is made possible by additional 787 deliveries. Ethiopian also plans to use its expanding 787 fleet to launch in Jun-2014 three weekly flights to Los Angeles via Dublin.
Ethiopian plans to take three additional 787-8s in 1H2015, growing its 787 fleet to 13 aircraft. These are the last three 787s from the carrier’s 13-aircraft commitment.
Ethiopian expands in the US and Europe
Los Angeles will become Ethiopian’s second destination in the US after Washington Dulles, which is served daily with 777-200LRs. Ethiopian has also augmented its presence in the US market with a new codeshare with United Airlines that was implemented in Nov-2014. Los Angeles and Washington Dulles are both United hubs.
Ethiopian also currently serves Toronto with three weekly 787-8 flights. Washington Dulles and Toronto are served non-stop eastbound but both flights stop in Rome on the westbound leg due to payload limitations in departing from the high altitude of Addis Ababa.
Dublin will become Ethiopian’s 10th destination in Europe. Ethiopian has continued growing its network in Europe – adding Madrid, Stockholm and Vienna in 2014 – and now in North America.
Ethiopian’s focus remains on Asia and Africa
But the primary focus for Ethiopian has and continues to be on expanding in Asia and within Africa.
Ethiopian CEO Tewolde Gebremariam told CAPA TV in Nov-2014 that the airline believes most of its future growth opportunities are in Asia, Africa and Latin America. He pointed out that that while “Europe is a strong market for us,” most of the growth over the last decade has been to Asia and China is now Ethiopian’s single largest market.
Ethiopian’s leading African network and increased presence in Asia along with Addis Ababa’s location gives the airline a strong competitive position in pursuing transit passengers heading between Asia and Africa. “This trend line is the fastest growing trend line today in the world,” Mr. Gebremariam said, referring to the Asia-Africa market.
Ethiopian expands in Africa with new JV airlines
In Africa, Ethiopian in 2014 launched services to Kano in Nigeria and resumed services to the Seychelles. Further regional growth is expected in 2015 as the airline is adding three 737-800s in 1H2015.
Ethiopian also has reportedly been discussing acquiring a strategic stake in government-owned flag carrier Rwandair and launching a new joint venture carrier with the government of South Sudan. If finalized both deals would cement the carrier’s leading position in the East African market. Ethiopian also has discussed over the last year potentially establishing a joint venture airline in the Democratic Republic of the Congo, which would serve as the group’s hub for Central Africa.
Ethiopian already has a 40% stake in Togo-based ASKY and a 49% stake in Malawian Airlines. It helped launch ASKY in 2010 while Malawian was launched in Jan-2014 as a joint venture with the Malawian government.
Ethiopian serves Lome and Lilongwe from Addis Ababa, enabling it to leverage the group’s hubs in other regions of Africa. Ethiopian also stops its Addis Ababa-Sao Paulo service in Lome, enabling connections in the small but fast growing Brazil-West Africa market.
Ethiopian already has Africa’s largest fleet
Including ASKY and Malawian, the Ethiopian Group currently has a fleet of 79 aircraft – more than any other airline group in Africa.
The fleet operated by Ethiopian Airlines currently consists of 69 aircraft, including 60 passenger aircraft and nine freighters. This also makes Ethiopian the largest single carrier in Africa.
Ethiopian plans to roughly double its fleet over the next 10 years, enabling it to maintain its status as Africa’s largest airline. Ethiopian’s fleet has already more than doubled in size over the last five years.
Ethiopian’s outlook is bright after emerging as the darling of Africa’s airline industry
Ethiopian also has been a standout in the African airline industry from a financial perspective. The airline has reported profits every year this decade while most other large African carriers have been in the red.
Ethiopian’s profits nearly doubled in FY2013 to ETB2.05 billion (USD113 million) as revenues increased 14% to ETB38.5 billion (USD2.124 billion). Ethiopian has not yet reported financial figures for FY2014 but the airline was likely again in the black – albeit at a reduced level due to the Ebola outbreak impacting demand to and from West Africa.
On several measures Ethiopian has quickly emerged as Africa’s leading airline. Perhaps most significant is the group’s still evolving role in setting up joint ventures throughout Africa. Ethiopian’s willingness to develop aviation across the continent is noteworthy particularly given that other major African carriers have been unsuccessful over the years with similar pursuits.
Ethiopian still faces challenges and obstacles in its quest to again double in size over the next 10 years. But the flag carrier enters the next phase of its development with a level of scale and efficiency that is rare for Africa. Its achievements over the last several years in a market where most others have struggled puts Ethiopian in a strong position to cash in on the growth and vast potential that Africa offers.
[CenterforAviation]