Excellence from Ethiopia

It seems every time you pick up a newspaper, there is another grim story about the mess at South African Airways (SAA) as it continues to gobble up billions of rands in taxpayers’ money. But it doesn’t have to be that way. And we don’t have to blame government ownership, or the fact that this is Africa.

I was at the African Aviation conference in Sandton recently and heard the most refreshing tale of an African airline success – something SAA would do well to try to emulate.

Ethiopian Airlines is forecast to make a profit this year of $250 million-$300 million, on a total turnover of $2.5 billion (a profit margin almost unheard of in the airline business.)

Read those figures again. And then take in the fact that its 80-plane fleet is not only the biggest in Africa but with an average age of just five years, the youngest in the global industry.

And, guess what? It is government-owned, just like SAA. So, being a state-owned enterprise is not necessarily a drawback to success.

Ethiopian Airlines acting chief financial officer Meseret Bitew told the conference: “We have had a number of different governments over the years, but they have all behaved ‘properly’, which is to say that they do not interfere with the day-to-day running of the airline.”

Bitew said the government of Ethiopia had just two stipulations for Ethiopian Airlines: “Expand and remain profitable.”

Undoubtedly, the airline industry in Africa is in financial crisis and there is a very real possibility that more carriers will be forced to close, or continue to be bailed out with huge tranches of state money.

And if airlines do go bankrupt, the impact on the continent’s burgeoning tourist industry – which offers a sustainable way to break out of the cycle of poverty for many Africans – will be catastrophically affected.

Chris Zweigenthal, chief executive of the Airlines Association of Southern Africa, said that while the international airline industry was booming, Africa’s carriers were, by and large, struggling financially.

Globally, the airline industry will make a profit of $29.7 billion this year, which is slightly down from the profit of $35.6 billion last year. The industry worldwide is enjoying one of the most prosperous times in the history of aviation.

By comparison, Africa’s airlines are predicted to lose $800 million this year. Southern Africa’s airlines alone racked up losses of $340 million last year, he added.

Zweigenthal said that just nine of the 28 airlines in the southern African region – both state and privately-owned – were profitable. Of the 13 state-owned airlines in the region, seven have acting CEOs and the churn in senior employees and managers contributes to instability and an inability to break out of the cycle of losses.

“There is also a serious loss of institutional knowledge,” he added.

Many CEOs of state-owned airlines spend most of their time in the offices of government ministers or their bankers, trying to secure bailout money or restructure their debt.

One wonders if anyone in SAA or our government would care to chat to the Ethiopians about how to run an airline properly.

Too many egos, methinks…