Star Alliance membership part of Ethiopian's growth plans

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ADDIS ABABA, Ethiopia — Ethiopian Airlines last week unveiled plans to use its impending Star Alliance membership and growing relationships with other African airlines in the alliance to boost the continent’s presence on the global travel scene.

Ethiopian and Star members South African Airways and Egyptair are already deeply involved in discussions to take minority stakes or make other investments in an airline they say likely would be created to serve Central and West Africa.

At the same time, Ethiopian said it would transform itself, creating a stable of subsidiaries to substantially increase its own revenue and profits over the next 15 years.

Ethiopian said its network would mesh well with Star’s.

"Our long experience in the Africa market, coupled with our strategic hub, Addis Ababa, and the recently created Lome [hub in Togo] will allow Star Alliance members to access many new markets in Africa," said Ethiopian CEO Girma Wake.

The experience also has been a profitable one, Wake said, with potential for even greater success thanks to the association with Star.

"Through its membership in Star, Ethiopian Airlines will gain access to the many markets across the globe," the alliance said last week. "By the same token, more business travelers from Ethiopia and across Africa will benefit."

The airline reported a profit last year of about $118 million, capping off a string of 10 consecutive profitable years.

By 2025, Wake said, the airline expects to net about $950 million. And over those same 15 years, Ethiopian should grow its revenue to about $9.5 billion from the $1.3 billion the airline reported on June 30, Wake told reporters last week at a briefing just before the Star announcement.

About $7.9 billion of that will come from international flying, Wake predicted, with $389 million from domestic flight operations, $1.4 million from cargo shipments, $20 million from maintenance work and most of the remaining revenue generated through its aviation academy.

"Each will have its own CEO and manage its own operations," Wake said.

He acknowledged that Ethiopian law does not allow for a holding company of the type envisioned by the airline, but added: "We’re working with the government to do that."

The airline is also building its own catering facility and starting its own ground-handling company.

Wake, who is scheduled to step down as CEO at the end of this year, is so optimistic partly because of Africa’s ability to weather the recession, at least in terms of air travel. Ethiopian, he pointed out, continued to grow over the past several years.

"There was no recession" in Africa, Wake said. What’s more, he said, there’s plenty of room to grow.

"There is a big vacuum in West Africa and a big vacuum in Central Africa; these have to be filled," Wake said.

One idea Ethiopian is entertaining, Wake said, is to start separate airlines for those regions because "we want to open more feeders."

Some of those feeders, though, could be done in joint ventures with South African Airways and Egyptair, Wake said. Ethiopian has already started to talk to those carriers and other alliance airlines about possible investments, he said.

South African Airways CEO Siza Mzimela said discussions among the three airlines for some type of investment of an airline startup to serve West Africa were far along. She said she expected an announcement of a joint venture would be forthcoming within months.

This report appeared in the Oct. 3 issue of Travel Weekly. 

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