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July 16th, 2009 |

Author: Gavin

Ethiopian Airlines New CEO Faces A Tough Task “We Habve Never Seen Such Stiff Competition Before

Ethiopian Airlines in one of Africa’s most respected airlines which employs top-ranking pilots, cabin crew and technicians, so it is no small wonder that the carrier, like many others of its standing ,faces the constant threat of s “brain drain” caused by mainly Middle Eastern and Asian airlines “poaching ” its personnel.

For the airlines recently appointed chief executive officer, Ato Tewolde Gebremariam, it may not be his only problem, but is certainly one of the biggest.

In an exclusive interview with World Air news Ethiopian correspondent, Kaleyesus Bekele, Gebremariam explained the problem saying that, one method he had used to stop 56 technicians being lured away to a Middle Eastern carrier, was to ban them from overseas travel. But he also has other plans, as he explained in detail.

“This (the brain drain) is the result of competition. The world has become a small village. Companies in different regions are competing fiercely as though they are in one country. Today Ethiopian Airlines is competing with carriers in Africa, America, Europe, and Asia. Competition is not in terms of passenger and cargo business. Carriers compete in hiring skilled labour.Carriers want to hire skilled personnel from anywhere and want to win the stiff competition. That is what the Middle Eastern carriers are doing.

“This is seriously affecting the developing nations because these countries spend a lot of money to train their pilots and technicians. For instance, in addition to the training, Ethiopian provides dormitory accommodation, food and pocket money for the trainees. After spending so much on the aviation professionals, the Middle Eastern carriers will siphon the readily available skilled labour.So what can we do about it?

“Well we think that we have to expand our aviation academy. We have secured a 42-million US dollar loan from a French bank for the expansion of the aviation academy. We are buying simulators; tools and equipment required for the school. We are constructing additional dormitories, class rooms and other facilities.

“We need to build our aviation academy capacity and we will train hundreds or thousands of pilots and technicians. Then we will have enough for our national carrier and we can export trained manpower to African and Middle Eastern countries.”

Few other African airline CEOs have thought of this solution-its almost a case of train in bulk-the excess for export.

This rather novel concept is indicative of the man who now sits in the Ethiopian Airlines hot seat. Tewolde Gebremariam began his career with the carrier in 1985 and served in different capacities in the cargo traffic handling department. Later he was appointed as regional director for India and South East Asia based in Mumbai and then transferred to Jeddah as area manager for Saudi Arabia.

When Ethiopian Airlines began direct services to the USA, he was appointed as area sales manager for North East USA and Canada based in New York. In October 2000, he became regional director for the Americas.

On August 16, 2004, Gebremariam was appointed as executive officer marketing and sales to head the carriers operations in these fields. On July 1, 2006 he was appointed as chief operating officer of Ethiopian Airlines to head all the operating divisions of the airline, Commercial, Flight Operations, Customer Services and Maintenance and Engineering.

For four years he successfully steered these operations of the airline during a period of an unprecedented and profitable growth.

Gabremariam was appointed chief executive officer of Ethiopian Airlines on January 1, this year.

Before joining the carrier, he had earned BA degree in Economics from Addis Ababa University and his Masters in Business Administration (MBA) from the Open University in the United Kingdom.

Asked whether there was not a danger of compromising the quality of education when the airline trained thousands of professionals,Gebremariams answer was an emphatic “No” .He explained his reasoning:”When we increases the number of students that we admit to our aviation academy we will not compromise the quality of the training. We can’t do that. The Ethiopian Civil Aviation Authority inspects our aviation academy as well as the International Civil Aviation Organization (ICAO).The US Federal Aviation Administration also inspects us. We do not have to compromise the quality of the training .We will expand the school and we will train as many as possible.

“We will satisfy our demand and we will send the surplus abroad to other African countries and the Gulf countries. These professionals will go there to work and send money home to their families, friends and relatives and that would be a source of foreign currency.

“The Philippines has 680 aircraft technicians working in Abu Dhabi .We have 15 technician s in Togo with the ASKY Airline and we have more in Angola. Why should we not train more and export more technicians?”

Gebremariam was then asked to explain how he settled the matter of banning overseas travel for the technicians who were being lured to an overseas airline.

“We had a meeting with the technicians and the Labour Union leadership. The Labour Union leader explained that the issue was not only a case of 56 technicians; it was an issue of an airline with 6000 employees. When 56 senior technicians are leaving from a single department at one go it will certainly affect the operation of the airline.

“The training only is not enough,” Gebremariam said, adding:” We have to make salary adjustments. Five years ago we agreed to make our salaries up to the international standards. In the past five years our salaries increased by 455 % .We are not yet up to the international standards. But our plan is eventually reach the international scale.”

Financial Status

It was a proud Gebremariam who explained the financial performance of Ethiopian Airlines in the 2009 -2010 Fiscal Year.

“That was the year that we finalized the ‘Vision 2010′ development strategy. Our revenue increased by 38% .Carriers in Europe and US grew at a rate 5%.Carriers there could grow at a rate of 10%.Even the fast-growing Middle Eastern carriers are not growing at the rate of 20-25% .We earned a net profit of 1,6-billion birr. The number of passengers carried reached 3, 3 million. We hauled 110000 tons of cargo.”

Asked about his feeling of the current political unrest in North Africa and Middle Eastern countries which has escalated the price of oil to a two-year high,Gebremariam replied:”This is of grave concern to any airline. We are closely following the developments. If you are a CEO of an airline the first thing you do every morning to monitor the global fuel price. Every morning after you check on the fleet departures and arrivals you check on the price of oil in the international market.

“Our heart beat increases and decreases with the wallowing oil price in the international market. There are three things that affect the price of fuel. The first is demand and supply. If demand surpasses supply then the price will go up and it will remain high for quite some time. This is fundamental.

“The second is temporary disruption. How long will the disruption in the supply of the Libyan oil continue? How long will the political unrest and violence in North Africa and the Middle East continue?

“The third factor is speculation .Businesses in the oil trading industry speculate the future price and purchase oil in bulk. They buy the oil not to use it for themselves but to sell it for a higher price.

“Just because it has reached 115 dollars today you do not make a change on your plan. You must ask if it will destroy and go away instantly like a cyclone, or will stay for long.

“If the situation persists we have to revise our plan of operation.Wemay have to reduce our costs. There are various means of reducing costs .We can reduce waste here and there. We may be forced to evaluate our route network,” he said adding that fuel constituted about 40% of the airlines total expenses.

New Aircraft

The airline has placed firm orders for 10 Boeing 787 Dreamliners,10 Boeing 737-300s,12 Airbus A350 XWBs,seven Boeing 777s and eight Bombardier aircraft (some of which have already been delivered).World Airnews correspondent asked how these purchases were being funded.

“Most of the money is secured from international banks in the forms of loans, Gebremariam explained.” The US EXIM Bank provides loan guarantee. If you get the guarantee from EXIM the commercial banks provide you the loans. Currently, Ethiopian has a seven billion birr loans. Barclay, RBS and Citi Bank, are providing us loans. We are holding talks with Morgan Stanley.Profitability are crucial in obtaining loans from banks. If you are profitable you will get a loan .And we always have to maintain our profitability.

Replying to a question on how the delay in the start of delivery of the Dream liners on order-delivery was due during the period 2008 to 2010 –Gebremariam said: “The delay in the deliveries of the Dream liner aircraft has affected us. In order to substitute these aircraft we leased several aircraft. This incurred additional cost. The leasing cost is cumbersome. When you lease you do not find aircraft with your own specification. When you order new aircraft the manufacturer makes the aircraft based on your choices.”

Fierce Competition

Wrapping up the interview with World Air news, Gebremariam was asked to describe how he saw the current competition from other airlines.

He replied:” The competition is getting very fierce. The air transport market is growing in Africa, Asia, Middle East and South America.

“The markets in Europe and America are not growing, they are saturated. So the airlines in Europe and America are looking for emerging markets in Africa, Asia, South America and Middle East. All eyes are now on Africa. Africa is attracting the attention of investors not only in the aviation sector, but also in oil exploration and mining sector. This is a good opportunity for us to grow. But it also draws the attention of more rivals.

‘At times the competition is unfair. The playing field is not even. The Middle Eastern carriers are highly subsidized by their governments. If you take Gulf carriers like Qatar Air they are not necessarily expected to make profits .They may operate with losses for five consecutive years. If you take Ethiopian, we have to make a profit every year and service our debt otherwise our lenders will take back the aircraft,”Gebremariam continued.

“The Gulf carriers are flexing their muscles in Africa. If you see Emirates they used to fly to major destinations in Africa like Cairo and South Africa some years back. Emirates operates twice daily to Addis Ababa. Emirates operate twice daily flights to Nigeria. They fly to all East African countries; they fly to Ghana, Ivory Coast, and Angola. We are witnessing a very stiff competition that we never have seen in the past.

“The airline industry in Ethiopia is not liberalized .The domestic flight service is protected from Ethiopian investors. If those who want to provide scheduled domestic flight services cant use an aircraft with more than 20 seats. We do not have any objection to that. We need to see domestic flight service providers.

“The seat limit will be increased soon to 50.The problem is: will private investors be profitable? He asked adding that Ethiopian Airlines would not object if the sector was liberalized.

About the Author

Anthony Juma is the Editor and Senior Aviation Director at Wings Over Africa Aviation.
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