No airline is coming through the corona crisis unscathed, and that includes Ethiopian Airlines, the only profitable airline on the African content in recent years. Over 90% of its fleet has been grounded since early March, and as CEO Tewolde GebreMariam put it in a recent Quest Means Business interview, “we [then] shifted from Growth Mode to Survival Mode”, turning the focus to its cargo business. “Cargo has been booming and we want to take advantage of that cargo business,” he went on to say. Much of that recent business has been with China and a growing relationship with Jack Ma is possibly now leading to greater things.
Speaking in an interview with Jeune Afrique on 31MAY20, Tewolde GebreMariam announced: “We want to become Alibaba’s official company in Africa. Alibaba is the most important e-commerce platform in China and has the ambition to position itself as an African platform. We want to cooperate. It’s a natural fit. We have the most extensive cargo network, the largest fleet, the largest cargo terminal, the most interconnections. Alibaba can reach any African country from Addis.”
Setting the eCommerce scene…
Alibaba established Addis Ababa as its second African hub (the first is Kigali, Rwanda) back on 25NOV19, when Ethiopia’s Minister of Innovation and Technology, Dr. Getahun Mekuria, signed a Memorandum of Understanding with Jack Ma, Founder of Jack Ma Foundation and Partner of Alibaba Group, at Ethiopia’s ICT Park in Addis Ababa, as the first step in helping Ethiopia launch its first eWTP (electronic world trade platform). At the time, Prime Minister Abiy Ahmed stated that this “Electronic trade platform is part of Ethiopia’s technological development [and is] a step forward to making Ethiopia among the five economic giants of Africa within the coming decade. It also expands the horizon for small and medium enterprises.”
With a functioning eWTP hub enabling smart logistics and services and opening cross-border trade for small and medium-sized enterprises (SMEs), the structure is in place to penetrate markets in China and other parts of the world. eCommerce is on the rise and that means a rise in air cargo, too.
The (air) road to China
Ethiopian Airlines has been flying to China since 1973. Back in February this year, it received a lot of criticism from its African neighbors (at a time when 59 airlines from 44 countries had stopped their China flights), for continuing to service China even during China’s lockdown, with fears that Africa’s “COVID-19 patient zero” would travel Ethiopian, since Ethiopia is the continent’s most frequented transit point.
Yet since March, those flights have become cargo flights bringing in much-needed medical supplies and PPE – much of them donated by China’s Alibaba Group Holding Ltd. and Jack Ma’s foundation, which had designated the carrier’s cargo division as its logistics partner and distribution center for Africa for those deliveries. Jack Ma explained “The world cannot bear the disastrous consequences of an epidemic of COVID-19 in Africa.” Millions of masks, test kits, protective clothing sets, face shields, swabs, thermometers, gloves, and ventilators have since traveled via Ethiopia to all 54 nations on the African continent, often in the record time of just 6 days, according to Ethiopian Airlines vlogs on LinkedIn.
Managing the Covid-19 challenge
Ethiopian Airlines reacted quickly to the unforeseen challenges posed by a near global standstill in passenger aviation. Already the largest cargo carrier on the continent, with its ten B777F and two 737F, it went on to convert 22 passenger planes to cargo aircraft within a very short period of time, doubling its cargo capacity and thus being able to take advantage of the rise in cargo capacity demand at a time when many other operators ceased flying. It also moves cargo on behalf of WFP and WHO. “Cargo has been booming,” Tewolde said, but despite the increased cargo intakes, he forecasts that corona will have cost Ethiopian Airlines a total of 1 billion USD in lost gross revenues by end of the fiscal year ending 30JUN20.
Nevertheless, the executive is proud of the way especially his Cargo & Logistics Services team is effectively managing the challenge and is determined to see this difficult period through without having to let staff go or ask for loans.
Uneven competition basis
“Bailouts should not be used to put bad businesses on life support, but unfortunately that is what we are seeing all over the world, and that is why we have decided to manage the crisis with our own internal sources – we have not taken any bailouts – but unfortunately we will have to deal with airlines being bailed out by their governments.”
Speaking in a recent Bloomberg interview, he pointed out that the aviation industry is probably the hardest hit by the corona crisis, and within that industry, the African airlines, many of which have been limping along on government subsidies since years, will likely suffer most, given Africa’s dependence on commodities exports (currently mostly throttled by lack of capacities and changes in demand), and many governments struggling to find the cash to bail them out.
Changes for the future?
That said, for Ethiopian Airlines, he is positive, believing that at least the East/West routes between Africa, China and India will recover more quickly than the IATA-envisaged 2-3 years, though North/South will take longer. Yet, given that “People are sick and tired of the lockdown – as you can see in Europe and America,” he assumes that passenger recovery to Ethiopia will be around 50% this summer already, and things will start looking up from there. “Once the pandemic is brought under control and passenger flights resume, we will configure [the 22 converted passenger-to-cargo aircraft] back into their original passenger cabin configurations.”
Asked by Quest about the pending 737-MAX planes at Boeing (from whom he is expecting compensation this month), he pointed out that “We still have those narrow-body acquisitions in our business plan,” which speaks for a quick switch back to “Growth Mode” again.
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