By John Aglionb
As big African airlines are grounded in heavy losses, Ethiopian Airlines continues to spread its wings.
An aggressive expansion strategy has helped the state-owned carrier transform itself from a competent regional player to the continent’s leading carrier in just five years.
In a region where most airlines are struggling to break even as they grapple with the collapse in commodities and political instability, Ethiopian Airlines recorded a full-year profit of more than all other African carriers combined, according to data from the International Air Transport Association.
Its performance has meant it has already met most of its goals for its 15-year master plan to 2025 in the first five years.
“The growth rate in the industry is very low — the average could be less than 5 per cent — but we have been growing 20-25 per cent annually compound, in revenue and fleet [size],” said Tewolde Gebremariam, its chief executive.
In the year to June 2015, the company recorded a net profit of 3.15bn birr ($148m), compared with 2bn birr in the same period a year earlier. Based on accounts audited by the Audit Services Corporation, which inspects state-owned enterprises, its operating profit margin was 9.49 per cent, up from 2.14 per cent in 2011 and at a level comparable with the best European carriers. It has also increased its routes to 89, up from 69 in 2011.
Analysts attribute much of this success to the carrier’s benevolent owner, which does not demand dividends and, through state policies, can help keep down labour and financing costs.
The collapsing oil price has slashed fuel costs and the company has also benefited from turmoil blighting its main rivals. Kenya Airways, for instance, launched a big restructuring programme last year, including selling off several of its larger aircraft, which followed the failure of an ambitious expansion plan launched in 2011.
Kenya Airways, which is 26.7 per cent owned by Air France-KLM, has reported losses for the past three years, including $252m in the year to March 2015, the largest in Kenyan corporate history. It has blamed rising competition, terrorist attacks in Kenya and hedging losses for its woes.
Read more:Ethiopian Airlines soars with help from the state
Source: FT
