How Africa’s No. 1 airline avoided layoffs and losses during the pandemic
August 20, 2021
By Ted Reed, The Points Guy
When the COVID-19 pandemic started, the biggest airline in Africa quickly saw that the sharp drop in passenger traffic meant that conversion to an all-cargo operation offered a sustainable path.
The quick switch enabled Ethiopian Airlines to largely evade the harsh financial consequences that have troubled most of the world’s airlines. The government-owned carrier didn’t lay off any of its 14,000 employees, it didn’t see a sharp revenue decline or a loss of profits, and it didn’t give up any markets. It just switched to cargo.
“By the end of March 2020 our passenger service was 90% gone, all our airplanes were grounded and our service was suspended,” Tewolde GebreMariam, the airline’s CEO, said in an interview last Friday. “We had a choice: To survive, we had to be creative and fast and we had to manage the crisis. So we focused on cargo. We quickly redeployed all resources to cargo.
“Contrary to the passenger business, the cargo business was booming,” he said. “Cargo was moving. The price was going up. (And) it was a matter of saving lives. There was demand for cargo, particularly for (personal protective equipment): masks, gloves, medical supplies. We were needed all over the world.”
The shift in cargo demand quickly became apparent to carriers everywhere, but few reacted as fully as Ethiopian. Normally 55% of air cargo is carried by passenger planes, so the collapse of passenger service created vast demand for cargo flights. Ethiopian, which already had 10 Boeing 777 freighters and three 737 freighters, quickly removed seats from 25 wide-body aircraft, converting them to all-cargo. The carrier has a fleet of 130 aircraft, mostly Boeing but also including 16 Airbus A350s and 29 Bombardier Q400s.
Ethiopian became the first airline to convert an A350 to all-cargo, enabling Airbus to declare, in an April press release, that “the A350 … turns out to be highly versatile.” Mikail Houari, president of Airbus Africa Middle East, said, “Let me express my admiration for Ethiopian Airlines’ remarkable achievement during this unprecedented pandemic.”
Ethiopian did not suspend any service, although some frequencies were reduced and other markets — notably China — have shifted from passengers to cargo. “We might be the only carrier in the world that never suspended flights,” GebreMariam said. “But many flights were without passengers.” Additionally, he said, few major carriers survived without any bailout money.
Also, Ethiopian flights carried an estimated several thousand stranded passengers who were returning to their homes in Ethiopia and elsewhere. “It was required by many governments to bring passengers home from Africa,” GebreMariam said.
Now, business on four North American routes “is recovering very slowly,” he said. On routes from the Addis Ababa hub to Chicago, Washington, New York and Toronto, loads are about 65%, due primarily to renewed business travel and visiting friends and relatives. Star Alliance connections typically account for single-digit percentages of the passenger loads.
A fifth route, to Houston, has not been restored because the carrier wants a westbound fuel stop in Nigeria to replace its previous fuel stop in Togo, so restoration “depends on Nigeria,” GebreMariam said.
Additionally, Ethiopian is not flying passengers to China, normally its biggest market, due to Chinese restrictions including quarantines on inbound international traffic.
In July, the African Airlines Association said Ethiopian was Africa’s top airline in passenger and freight traffic during calendar year 2020, when it carried 5.5 million passengers and 500,000 tons of freight through Addis Ababa. In total, African airlines carried 34.7 million passengers, down 64% from 2019.
AFRAA also said Ethiopia is the most connected country in Africa due to its large number of direct flights within the continent.
Ethiopian serves 50 of the 54 African countries, excluding only Algeria, Libya, Morocco and Tunisia. “We are in the eastern part of the continent and they are up north,” GebreMariam said. “Their business partners are mainly in Europe and the Middle East.”
For the fiscal year 2020, Ethiopian reported revenue of about $3.3 billion, down from about $4.2 billion the previous year. GebreMariam said the airline was profitable in 2020 and also for the first half of 2021. The carrier serves 127 passenger and cargo destinations; its fleet has an average age of 5 years.
The International Air Transport Association said last month that in June, African airlines’ traffic fell 68% from the same month in 2019, but improved from the 71.5% decline in May compared to May 2019.
An Ethiopian Boeing 737 MAX crashed in March 2019, killing all 157 people aboard and prompting the worldwide grounding of the aircraft. Now, with the aircraft flying again, Ethiopian may order more, but not quickly. China is still considering whether to allow the MAX. “We will see what China comes up with,” GebreMariam said. “We plan, as we always planned, (that) we will not be the first carrier (to order). We will be the last.”
GebreMariam denied social media allegations that Ethiopian is transporting weapons or government soldiers to the war-torn Tigray region of Ethiopia. He said such flights are prohibited by the carrier’s insurance policies.
African travel has been recovering slowly, but the delta variant has raised new concerns about the spread of the virus. “In Africa, the COVID-19 impact is much later than the rest of the world,” GebreMariam said. “In terms of the human cost, Africa has managed better this time around.
“We are trying to increase capacity in cargo, but Boeing is not producing enough freighters,” he said. “It’s very difficult to diversify.”