1. Ethiopian Success Strategy
&
Challenges of Air Transport in Africa
June 2013

2. 2
• Airline industry:
- Highly capital intensive
- Hypercompetitive
- Too sensitive to economic cycles: difficult to formulate annual
plan
• Need for long term planning:
- Aircraft are high value assets with lead time between order &
delivery taking 5 to 10 years
- Fleet financing, a complex process requiring time
- Airport infrastructure development takes time
- Understanding the big trends & outlining general strategic roadmap
is critical to ensure survival of airline
Why a 15 Year Plan?
Vision 2025: Ethiopian Strategic Roadmap

3. Vision 2025:
Fast, Sustainable & Profitable Growth Strategy
• Revenue: from 1.3 billion $ in 2010 to 10 billion $
• Passenger number: from 3.2 million in 2010 to 18 million
• Cargo uplift: from 135,000 tons in 2010 to 820,000 tons
• Fleet size: from 45 aircraft in 2010 to 112 aircraft
• International passenger destinations: from 59 in 2010 to 90
• Staff size: from 5,600 in 2010 to 17,000
Overarching Strategic Goals
Leading Aviation Group in Africa

4. Vision 2025:
Choice of Diversified Aviation Business Model
• Availability of huge & unsatisfied demand for aviation services in
Africa
• Opportunity for cross-subsidy among the business units & cross
utilization of common resources
• Risk diversification, when the core airline faces recession, the other

5. • Fast, profitable & sustainable growth with strong synergy among
business units
• Cost Leadership
- Network
- New & modern fleet
- Labour cost
- Operational excellence
• 4 Star airline with 5 star service delivery
- African flavoured Ethiopian hospitality
• Multi-hubbing in Africa
- One brand with multiple products (hub-spoke)
Overarching Strategies
Vision 2025:
Fast, Sustainable & Profitable Growth Strategy

6. Betting on Africa!
Vision 2025:
Why Fast, Profitable & Sustainable Growth?
• 1 billion pop. - young
• 2nd
fastest growing continent
• 6% GDP growth next Decade
• GDP of $ 2.6 trillion by 2020
• 60% of world’s uncultivated arable land
• Untapped resources: 42% of world’s gold;
12% oil; 90% diamond, etc…
China

7. Vision 2025:
Why Fast, Profitable & Sustainable Growth?
6. Reasons for Africa’s Rise
1. Right Demographic Profile (young)
2. Rapid urbanization: By 2030, 50% in cities
3. Quantum leap in ICT
4. Better peace & governance
5. Wealth of natural resources attracting huge flow
of FDI
6. Emergence of sizable consumer society
Betting on Africa!
China

8. Growth & Transformation (2010-2015)
• GDP: +11%
• Exports: +25%
• Massive infrastructure development:
- Road: 64,500 km
- Rail: 2395 km
- Energy: 10,000 MW
- Telecom: 45 million mobile users
• Rising middle class
* Source: The Economist
Vision 2025:
Why Fast, Profitable & Sustainable Growth?
Ethiopia Roaring!

9. Africa: 8 Mega Cities by 2031

10. African Air Travel Surging!African Air Travel Surging!

11. 11
Vision 2025:
Why Fast, Profitable & Sustainable Growth?
Location, Location, Location!

12. 12
ADD
Vision 2025:
Why Fast, Profitable & Sustainable Growth?
Ideally located to serve the fastest growing trade lane:
China – India – Africa - Brazil

13. • African Airlines: Only 18% market share of intercontinental travel
Matter of Survival!
Vision 2025:
Why Fast, Profitable & Sustainable Growth?
• Stiff & stiffening competitive pressure:
- More than 40 carriers from North America, Europe,
Asia & Mid East maintain regular flights to Africa &
number is increasing...
- Need to expand market share & achieve critical
mass or certain death
- Long hauls dominated by more & more
consolidated mega airlines
(ex.: AF & KLM, Lufthansa Group, IAG, United,
MEB3, etc…)
- National & regional routes to be dominated by low
costs

14. • 4 Star airline with 5 Star service: African flavoured Ethiopian hospitality
• Operational excellence & efficiency
- On-time performance
- Baggage Irregularity
• Economies of scale, scope & density
- Optimal network efficient hub with minimum connecting time & layover
- New & fuel efficient aircraft: B777, A350 & B787
- Maximizing equipment utilization
- Matching capacity with traffic forecast for each route
• Above average labour productivity
• Investment in IT & best practice process & systems
• Strategic & structural cost reduction programmes
Cost leadership But Differentiated Service Delivery
Vision 2025:
Why Cost Leadership?

15. How is Ethiopian Doing?
2011-12 Performance: Fast, Profitable & Sustainable Growth
Capacity (ASK):Capacity (ASK):
Passenger carried: 5.1 millionPassenger carried: 5.1 million
Freight (FTK):Freight (FTK):
Op. Revenue: 34 billion ETBOp. Revenue: 34 billion ETB
Operating Profit: 1 billion ETBOperating Profit: 1 billion ETB
+22%
+25%
+16%
+37%
+155%

16. • 8 New destinations:
Toronto
Cotonou
Berbera
Muscat
Dammam
Kuala Lumpur
Blantyre
Ndola
• 72 international, 45 African & 17 domestic destinations
Fast Growing NetworkFast Growing Network

17. • Regional Hubs:
West, Southern & Central
• Underserved markets
• Hubs: closer to market
- MRO services
- Academy
- Ground Handling
- Catering
• Multiple gateways from Africa
Filling the void; availing critical air connectivity
Vision 2025:
Multi-Hubbing Successfully Implemented in West
Africa

18. Connecting the Earth:
Leading global network serving 1,329 airports
& 194 countries!
Vision 2025:Vision 2025:
Expanding Market Reach with StarExpanding Market Reach with Star
AllianceAlliance

19. No.1 Freight Operator in Africa
24 Cargo destinations & 6 dedicated freighters

20. Current Performance Vision 2025 Targets
(2011/12)
Revenue 2 billion $ 1. 8 billion $
Passenger 5.1 million 5.6 million
Fleet size 58 58
Intl
destination
s
72 66
3rd
Year of Vision 2025: On Track!

21. Major Challenges
Europe in recession
1.9%*
5.3%*
-0.3%*
3 Speed Global Economy
Emerging economies:
growing but slowing down
US: anemic growth
* Growth in 2013

22. 112 $
Major Challenges
Africa: High Cost Environment!
1
2
3

23. Major Challenges
Africa: Obstacles!
4
5
7
6

24. 1. Fleet: Current Orders of 36 aircraft
- B777s; A350s; B787s; B737s; Q-400s
2. Infrastructure
- New cargo terminal:1.2 million tons capacity
- New MRO hangar & apron
3. HRD
- Academy expansion: curriculum & in-take
- 4,000 trainees annual in-take capacity
4. Systems
(ICT, Policies, Procedures & Processes)
Four Pillars of Our Vision 2025

25. THANK YOU