Ethiopian Airlines’ African ambitions

In 2010, Ethiopian Airlines set out a bold vision for future growth which included 725,000 tonnes of cargo by 2025. In 2014 it was a quarter of the way to that target, with cargo tonnage of 187,000 tonnes, up 40% since the plan was announced.
Still some way to go then, but the carrier is expanding with gusto and investing heavily in its cargo product. It was the first African airline to fly Boeing 777s and Boeing 787s and was the most profitable airline on the continent in 2013-14. Who is to say that 725,000 tonnes is not within reach?
A key factor in the growth has been 777 freighters, of which the carrier now has four. Ethiopian was the first airline in Africa to order the freighter, taking delivery of the first in 2012 and the fourth one last November. Two more are on order, due to arrive in October and November this year.
The freighters fly to both Europe and Asia, with the biggest route being to Liège in Belgium, where Ethiopian has its European hub.
Berhanu Kassa, director global cargo sales and service for the carrier, says frequencies vary from 10 to 12 a week, depending on demand. Outbound the flights are almost entirely filled with flowers — Ethiopia’s big export commodity.
Return cargoes are more problematic, of course. Kassa says there is some general cargo back to Africa, but the 777Fs also fly on from Addis Ababa to Shanghai twice a week and Hong Kong five times a week.
Europe to Asia cargo is the target eastbound for these flights, while westbound there are Chinese exports bound for Africa, as well as to Riyadh and Jeddah. The Hong Kong flights also stop at Indian airports such as Hyderabad and Chennai to pick up cargo on the way back to Addis.
For the Europe to Asia cargo Ethiopian is obviously competing with a lot of other carriers, many of which have more direct services.
Kassa admits that “this is not a prime product for us — it is a fill-up traffic as we have to operate anyway”, suggesting that price is a key factor in the competitive mix.
To increase southbound traffic Ethiopian has been re-directing some of its Liège flights to Brussels to pick up outbound cargo there.
Kassa says there are a couple of such flights a week: Brussels Airport interestingly claims to have four.
There is also a plan to develop export traffic from Europe to other African countries. Kassa mentions Lagos and Johannesburg as targets.
In the reverse direction he says that there is some growth in exports from African countries. “It is not a big traffic, but it is increasing.” While currently perishable exports come only from Ethiopia, Kassa says Ugandan produce is a possible target for the future.
Johannesburg is also a source of some exports to Europe.
To serve regional destinations Ethiopian has two Boeing 757 freighters. It used to also have two MD-11Fs but these have been sold back to Boeing as part of the 777F deal. The 757s fly to places such as Lagos, Kano, Lomé, Douala, Brazzaville, Harare, and Lusaka.
They also serve Jeddah and Riyadh, and are used on some flights to Dubai and Mumbai, though the 777Fs are also deployed on these two routes.
On the passenger side Ethiopian has developed a hub in Lomé, through a stake in ASKY Airlines of Togo, serving ten destinations in west Africa.
In 2013 it also bought a 49% stake in Air Malawi, which it renamed Malawian Airlines, and in March, Ethiopian chief executive (and former cargo boss) Tewolde Gebremariam talked of setting up an airline in Nigeria.
Kassa describes the Lomé operation as “mainly passenger” but says the carrier is exploring its cargo potential.
“There are destinations we do not serve directly that could be reached from there, so we are considering it as a cargo hub as well. We operate weekly 757 freighter flights to Lomé and are considering having a smaller capacity freighter to do feeder flights.”
He also alludes to similar plans for Malawi, and a possible joint venture in the Democratic Republic of Congo, saying that “passenger and cargo always go together”.
Back in the long-haul arena, once the new 777Fs arrive in October and December, Ethiopian is considering branching out into new territory.
Destinations under study include Hanoi, Seoul and Moscow. “There is still a big potential for flower exports to there,” says Kassa of the latter airport.
Long-haul expansion is not just freighters, however.
Ethiopian now has six 787-8s with six on order, six 777-20LRs, two 777-300ERs with two orders, and has 14 Airbus A350-900s on order, with first delivery expected in 2016. Its seven Boeing 767-300ERs, the remains of ten that used to make up its long-haul fleet, are due to be retired by 2018.
Since the 777s started joining the passenger fleet in 2010, the carrier has been branching out, creating new belly cargo opportunities as it does so. It now serves Washington, Toronto, Guangzhou, Beijing and Singapore, and in recent months has added a thrice weekly 787 flight to Tokyo via Hong Kong, a thrice weekly 787 to Los Angeles via Dublin, and a thrice weekly 767-300ER to Manila.
Kassa says the new widebodies, with their 15-25 tonnes per flight capacity, are making a big contribution to cargo growth. “Most of the new routes are to major sources of cargo, so their role in the development of the cargo business is enormous,” he says. “From Addis we now uplift 120-150 tonnes of belly cargo a day.”
Accommodating all this growth — and also making space to develop more transit traffic — requires new cargo facilities at Addis. The current cargo terminal has a capacity of 150,000 tonnes, but a new facility is under construction which will be twice that size and have expanded perishable capabilities.
Kassa says the building work is roughly 35% complete and that the current projection is that the terminal will be operational in 15 months. A second phase, with another 300,000 tonnes capacity, is also on the masterplan, but a decision to implement that will be taken at a future date.
The airline is right to be a bit cautious because it is experiencing some headwinds on the cargo front.
Kassa admits that the big belly capacity of the Middle Eastern carriers is a competitive problem, particularly as they focus more on African markets.
This has put yields under pressure with cargo revenue growing only 16% for Ethiopian in the past year, despite a 27% rise in traffic on a 20% growth in capacity.
He is not fazed, however: “Competition is not new for us, and we have developed a better strategy and different types of marketing to deal with it,” he says. “One area we are looking at is service delivery and achieving higher flown as booked. We have already seen a big improvement in this area.”
Amid all this growth, Ethiopian Cargo also finds time to focus on e-freight.
Kassa is proud of the carrier’s record, with March figures from IATA showing it has e-air waybill penetration of 68.8% worldwide, compared to an industry level of 26.2%, and 100% in its home hub.
Still, he says there is more to do to fully implement e-freight. “It is not only the airline doing the job — if it was it would be much easier.
"The preparedness of other stakeholders such as Customs makes a big difference, and in many places Customs authorities are not yet prepared for it.”  ■