5 things SAA can learn from Ethiopian Airlines - now Africa’s most profitable airline

Business Insider SA
Ethiopian Airlines' new Boeing 787 Dreamliner at the Dubai International airport. The airline has ordered 10 new 787's from Boeing. (Instagram: @fly.ethiopian)

The past five years, Ethiopian Airlines has doubled the number of their passengers, surpassed a target it set for 2025, and increased its profit fivefold. 

South African Airways (SAA), comparatively, lost nearly 300,000 passengers and posted six consecutive years of operating losses, amounting to more than R12 billion. 

SAA was also displaced by Ethiopian Airlines as Africa’s largest carrier last year after Ethiopian Airlines managed to grow its seat capacity by 177.7% in 7 years.

“Though state-owned, [Ethiopian Airlines] is, first and foremost,  a business,” Andrew Barlow, a researcher at the Helen Suzman Foundation writes in a column.

“The lessons for SAA’s shareholder, our government, are manifold and yet straightforward and easy to implement.” 

Here are five things SAA can learn from Ethiopian Airlines:  

Hire professionals, not politicians 

Ethiopian Airlines’ current management team has over 421 years of airlines industry experience between them, says Barlow. The current CEO Tewolde Gebremariam began working for Ethiopian Airlines’ cargo traffic handling department in 1985 and worked his way up the ladder gradually. “The Ethiopian government … allow(s) the management team, in their capacity as the professionals, to run the company on sound business principles." 

Government frugality

None of Ethiopia’s civil servants receive complimentary tickets on the airline, in stark contrast to South Africa were politicians enjoy SAA benefits even after they’ve left the civil service. Furthermore, Ethiopian airlines employ the industry standard number of staff needed on board each flight, whereas SAA employs twice that number. "You can't be as lavish as South African Airways and expect to survive,” CEO Gebremariam says.

Adopt a clear vision, and then stick to it

More than a decade ago, the airline decided to reposition itself. It started by revamping its international network. It created a morning schedule of about 52 flights to African destinations, and when these flights returned, the same planes would be used for an evening schedule for international flights to the Middle East, Europe, Asia and the Americas, Ethiopian Airlines CEO Gebremariam told the Daily Maverick. A strict schedule and efficiencies resulted in its profits more than doubling in five years to $1.3 billion - way above the vision’s targets. 

The airline then set itself a target of reaching 90 destinations by 2025 globally, but Gebremariam recently announced that they now already serve 100 destinations

Don’t rely on government loans

SAA has a long history of government bailouts, with the treasury calling on the Public Investment Corporation, which control the government pension fund, to grant SAA an R100 billion loan. But Ethiopian Airlines “doesn’t expect a cent from the government,” Gebremariam says. 

Gebremariam says a government has to make up its mind if the airline the government is “a strategic asset or simply business”.

Insource infrastructure and skills development. 

Ethiopian Airlines has Africa’s largest aviation training academy. It is training over 4,000 pilots, marketers and flight-attendants annually. It also owns the largest cargo terminal in Africa, the largest technical maintenance facility, and plans to expand its catering facility to 80,000 meals per day, again making it the largest in Africa. “Outsourcing is not big in Africa outside South Africa, hence this approach,” Gebremariam says. 

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