Fast growth is mandatory, Ethiopian CEO Tewolde Gebremariam

Tewolde Gebremariam

Ethiopian Airline has been growing fast since 2005. During the past seven years the airline grew sevenfold.

Addis Ababa, Ethiopia – The national flag carrier is opening a number of new destinations and acquiring modern jetliners, including the Boeing 787 Dreamliner and B777s. However, the road has never been a bed of roses for the airline. Kaleyesus Bekele of The Reporter sat down with the CEO of the airline, Tewolde Gebremariam, at his office and discussed the growth of the airline and the challenges facing the management.

The Reporter: Tell us about the current status of Ethiopian Airlines.

Tewolde Gebremariam: As you know we are in the middle of the implementation Vision 2025 (a 15-year growth plan). The plan was considered by many to be a very ambitious one. It is a scaled-up growth plan. We started it in the fiscal year 2010-2011 and now we are in the fourth fiscal year. When we initiated Vision 2025, many people within the company and outside, including media people, said it was very ambitious. And, it is true that it is very ambitious. But making a thorough analysis of the environment and the capability of the airline, we believed that it is achievable and should be achieved. The growth plan is very necessary for Ethiopian Airlines. People ask if it was realistic and if it was achievable. Many people say that it is a very fast growth. I think these are valid and good concerns. But when you view the airline industry in general it is a very capital-and labor-intensive industry. As a result of a high proportion of fixed capital and labor intensity, the airline industry is always driven by volume. Volume matters. Scale matters. And size matters in the airline industry because it is all about economics of scale. So if you have the critical minimum mass in terms of size the fixed cost is absorbed by a larger volume of output, therefore your unit cost comes down. This is the rule that governs the industry. That is the reason why every airline, as much as possible, wants to grow. In terms of fleet you need the minimum number and composition of fleets to make the economics of scale in terms of operation and of the number of passengers. This is the very reason why we developed fast, sustainable and profitable strategy.  It is the right strategy and it is proved right. And now four years into it we have ascertained and proved that it was the right strategy and is achievable.

Read more at: The Reporter