ET 5e

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ET 5e

  1. 1. Ethiopian Success Strategy&Challenges of Air Transport in AfricaJune 2013
  2. 2. 2• Airline industry:- Highly capital intensive- Hypercompetitive- Too sensitive to economic cycles: difficult to formulate annualplan• 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 roadmapis critical to ensure survival of airlineWhy a 15 Year Plan?Vision 2025: Ethiopian Strategic Roadmap
  3. 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 17,000Overarching Strategic GoalsLeading Aviation Group in Africa
  4. 4. Vision 2025:Choice of Diversified Aviation Business Model• Availability of huge & unsatisfied demand for aviation services inAfrica• Opportunity for cross-subsidy among the business units & crossutilization of common resources• Risk diversification, when the core airline faces recession, the other
  5. 5. • Fast, profitable & sustainable growth with strong synergy amongbusiness 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 StrategiesVision 2025:Fast, Sustainable & Profitable Growth Strategy
  6. 6. Betting on Africa!Vision 2025:Why Fast, Profitable & Sustainable Growth?• 1 billion pop. - young• 2ndfastest 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. 7. Vision 2025:Why Fast, Profitable & Sustainable Growth?6. Reasons for Africa’s Rise1. Right Demographic Profile (young)2. Rapid urbanization: By 2030, 50% in cities3. Quantum leap in ICT4. Better peace & governance5. Wealth of natural resources attracting huge flowof FDI6. Emergence of sizable consumer societyBetting on Africa!China
  8. 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 EconomistVision 2025:Why Fast, Profitable & Sustainable Growth?Ethiopia Roaring!
  9. 9. Africa: 8 Mega Cities by 2031
  10. 10. African Air Travel Surging!African Air Travel Surging!
  11. 11. 11Vision 2025:Why Fast, Profitable & Sustainable Growth?Location, Location, Location!
  12. 12. 12ADDVision 2025:Why Fast, Profitable & Sustainable Growth?Ideally located to serve the fastest growing trade lane:China – India – Africa - Brazil
  13. 13. • African Airlines: Only 18% market share of intercontinental travelMatter 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 criticalmass or certain death- Long hauls dominated by more & moreconsolidated mega airlines(ex.: AF & KLM, Lufthansa Group, IAG, United,MEB3, etc…)- National & regional routes to be dominated by lowcosts
  14. 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 programmesCost leadership But Differentiated Service DeliveryVision 2025:Why Cost Leadership?
  15. 15. How is Ethiopian Doing?2011-12 Performance: Fast, Profitable & Sustainable GrowthCapacity (ASK):Capacity (ASK):Passenger carried: 5.1 millionPassenger carried: 5.1 millionFreight (FTK):Freight (FTK):Op. Revenue: 34 billion ETBOp. Revenue: 34 billion ETBOperating Profit: 1 billion ETBOperating Profit: 1 billion ETB+22%+25%+16%+37%+155%
  16. 16. • 8 New destinations:TorontoCotonouBerberaMuscatDammamKuala LumpurBlantyreNdola• 72 international, 45 African & 17 domestic destinationsFast Growing NetworkFast Growing Network
  17. 17. • Regional Hubs:West, Southern & Central• Underserved markets• Hubs: closer to market- MRO services- Academy- Ground Handling- Catering• Multiple gateways from AfricaFilling the void; availing critical air connectivityVision 2025:Multi-Hubbing Successfully Implemented in WestAfrica
  18. 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 StarAllianceAlliance
  19. 19. No.1 Freight Operator in Africa24 Cargo destinations & 6 dedicated freighters
  20. 20. Current Performance Vision 2025 Targets(2011/12)Revenue 2 billion $ 1. 8 billion $Passenger 5.1 million 5.6 millionFleet size 58 58Intldestinations72 663rdYear of Vision 2025: On Track!
  21. 21. Major ChallengesEurope in recession1.9%*5.3%*-0.3%*3 Speed Global EconomyEmerging economies:growing but slowing downUS: anemic growth* Growth in 2013
  22. 22. 112 $Major ChallengesAfrica: High Cost Environment!123
  23. 23. Major ChallengesAfrica: Obstacles!4576
  24. 24. 1. Fleet: Current Orders of 36 aircraft- B777s; A350s; B787s; B737s; Q-400s2. Infrastructure- New cargo terminal:1.2 million tons capacity- New MRO hangar & apron3. HRD- Academy expansion: curriculum & in-take- 4,000 trainees annual in-take capacity4. Systems(ICT, Policies, Procedures & Processes)Four Pillars of Our Vision 2025
  25. 25. THANK YOU

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