How Ethiopian Airlines is overcoming the airline crisis
Despite the challenges brought about by the coronavirus crisis, Ethiopian Airlines has not reached out for state aid. It has not laid off any workers and has not canceled any of its outstanding aircraft orders. Clearly, the African giant is doing something right. CEO Tewolde GebreMariam has provided some insight into how his airline is succeeding where so many others have failed.
No state aid for Ethiopian, no plans to ask for it.
With the bulk of the world’s legacy airlines reaching out for state support and laying off staff, Ethiopian Airlines has not done either of those things. In fact, it has no plans to downsize its workforce or to ask its country for assistance. CEO Tewolde GebreMariam told The Africa Report that,
“I never said I would appeal to the state. To date, we don’t need them. We are working hard to manage the crisis with our own resources. So far, Ethiopian has managed to pay all staff salaries, to avoid layoffs and to keep flying, while so many other similarly networked carriers have not. Even through the worst of the crisis, it kept its links with China, something that was criticized at the time.
While it hasn’t had aid from Ethiopia, GebreMariam did say that China had provided some assistance. According to the CEO, Beijing had provided support to all airlines that continued to fly into the country, although he told The Africa Report, “This is a very limited support from the Chinese government, of a relatively modest amount, which depends on the number of flights, the seat capacities deployed.”
So how is Ethiopian surviving the crisis in such a healthy state?
What’s Ethiopian doing right?
In the interview, GebreMariam outlined his airline’s roadmap to survival, and why it is doing so well when others are not. Alongside a strict cost-cutting program, Ethiopian was quick to look outside the box to maintain its liquidity. The CEO said,
“The strategy of diversifying our activities into cargo, maintenance and hotels is proving to be the right one, as it is helping us to get through this period. We are taking full advantage of it.” He went on to explain how the airline had kept revenues flowing, even as passenger demand ground to a halt. He said, “As soon as the passenger transport business came to a halt, we were able to turn to cargo and maintenance. We doubled our cargo capacity, we converted 20 passenger aircraft for cargo in addition to the 10 Boeing 777s and two Boeing 737 Cargo aircraft that we had. We will continue to expand in this segment. This will allow us to generate cash until the passenger business resumes.”
Ethiopian is one of many airlines that have turned to cargo to stay in business through the crisis. However, it seems the African airline has jumped into the cargo business with far more enthusiasm than some other carriers. Where most airlines have been noted to have converted a handful of passenger aircraft for cargo operations, Ethiopian’s rapid adaptation of 20 passenger planes has made it a key operator in the Asia-Africa cargo space.
What’s next for Ethiopian?
Ethiopian has already mooted lending its support to airlines in the African continent. In early May, the CEO publicly stated that he wanted to be on hand to bailout struggling carriers, and has already cited Air Mauritius as one he would like to assist.
He said that there are no discussions ongoing on with Air Mauritius yet, or with Kenya Airways, but there is a “willingness to discuss.” He did, however, state that there are ongoing discussions with Air Madagascar, and that, “We are already present in the capital of companies in Chad, Togo and Equatorial Guinea, and we provide technical assistance to Camair-Co in Cameroon.”
If things don’t continue in its favor, Ethiopian is not shy to implement a ‘plan B,’ however. The CEO said, “…if the situation worsens, we will look at other options, such as restructuring our debt, borrowing money for liquidity. It is very difficult to know whether the recovery will be slow or fast.”
Nevertheless, right now, Ethiopian is not planning any major changes. The airline has 60 aircraft on order, with some slated for delivery this year and next. GebreMariam said that these have been pushed back, but that the orders are still in place and he has no plans to cancel or change the airline’s long-term fleet strategy.
Overall, it seems that Ethiopian’s commitment to efficiency and outside of the box thinking has allowed it to survive the crisis so far. Although GebreMariam noted that it has suffered a loss of earnings of around $1bn so far, he is confident it will continue to thrive despite the challenging environment.
