Ethiopian Eyes Lucrative Nonstop Routes as Airbus Report Unveils Untapped Potential

Jul 7 , 2024. By MUNIR SHEMSU ( FORTUNE STAFF WRITER )

Ethiopian Airlines can eye an opportunity to grow and expand by introducing nonstop flights on unserved or underserved routes, a recent study from Airbus revealed. The study identified 11 routes that previously had nonstop flights while showing Ethiopian's wide-reaching market share despite its relatively limited engagement in uninterrupted flights to access the unserved routes.

“Ethiopian Airlines, with its strategic positioning and modern fleet, could potentially fill this gap, providing a much-needed direct connection and enhancing its footprint in the intercontinental travel market,” the study noted.

Airbus and AviaDev's joint study, released two weeks ago, uncovered five intra-continental and 10 international underserved routes involving Africa. Despite Ethiopian Airlines' extensive market share, its engagement in uninterrupted flights on unserved routes remains relatively limited. Most routes from Addis Abeba to North America include an intermediate stop in Europe or West Africa. Based on origin and destination data and flight schedules from December 2022 to November 2023, the study outlines the potential for introducing nonstop services on key routes over the next two years.

The Airline has already demonstrated success on key routes such as Lagos-New York and Johannesburg-Mumbai, which it could use as a model for capturing the Harare-London route, currently Africa’s most important unserved route based on origin-destination (O&D) traffic levels.

Currently, Ethiopian Airlines operates the longest nonstop flight on the Harare-Addis Abeba route. British Airways operated this route until 2007, and Air Zimbabwe continued until 2012. Despite substantial traffic levels and historical precedence, the route remains unserved today. Emirates and Qatar Airways dominate the route, albeit with much longer itineraries transiting through Dubai and Doha than a potential direct service through Addis Abeba.

Airbus’s study identified several intra-African routes with high potential for nonstop service, including Abuja-Nairobi and Cape Town-Lagos. Ethiopian Airlines dominates the Abuja-Nairobi route through connections at its Addis Abeba hub. Introducing direct flights on these routes, Airbus' study urges, would enhance travel convenience, reduce journey times, and stimulate new demand.

Airbus’s study uncovers the benefits of launching new nonstop services, which typically lead to increased passenger demand due to improved accessibility, higher demand, and decreased trip complexity — effects known as stimulation effects.

Mesfin Tassew, CEO of Ethiopian Airlines, believes that a dedicated department at the Ethiopian Airlines Group explores new routes, considering factors such as passenger traffic, demand, and profitability.

"There're certainly underserved routes in Africa," he said. "But our desire isn't the only factor determining our entry."

Mesfin recalled instances where securing air traffic rights took a long time or was outright denied by civil aviation authorities in some African countries, even after attempting to cater to underserved routes. He pointed to ongoing efforts to increase flights from Nigeria and Kenya, yet approvals from authorities in these countries are still pending. The Airbus report acknowledges that geopolitical issues, air service agreements, and airport slot constraints can impact route serviceability.

The International Air Transport Association's (IATA) latest annual report reveals that Africa contributes only two percent to the number of worldwide passengers despite accounting for nearly a fifth of the global population. Initiatives like the Single African Air Transport Market (SAATM) are designed to enable greater connectivity.

“Fifth freedom is not our priority,” he told Fortune, referring to the right to carry passengers from a foreign country to another, while en route to/from a home country.

Mesfin confirmed Ethiopian Airlines' plans to start five new destinations in the fiscal year. The airline already kicked off with flights to Warsaw, Poland, in early July. The Airline will continue relying on its hub-and-spoke model, hoping for wider adoption of SAATM principles.

"Increasing air transport will bring a multitude of benefits for African countries," he said.

According to Mesfin, Ethiopian Airlines is open to partnerships with existing airlines or establishing new ones, citing collaborations in Zambia, Malawi, and Togo. However, he acknowledged setbacks, such as the suspended project in Nigeria following a political transition and delays in launching a joint venture in the DR Congo announced two years ago.

Airbus's study also discovered that the Mumbai-Johannesburg route is the second most underserved market. No nonstop service exists between Southern Africa and India, despite traffic levels surpassing those of many existing nonstop services to and from Africa. While British Airways and Virgin Atlantic Airways capture a portion of this market through much longer routes, despite a flight path nearly 2.3 times longer than a potential direct itinerary, Ethiopian Airlines holds a formidable 45pc share of origin and destination flights between these cities by transiting through Addis Abeba.

The study projects captured traffic in 2026 that could sustain six directional flights a week, utilising a widebody aircraft in the 250-seater category.

Ahmed Kellow has served Ethiopian Airlines as the third CEO since 1971, in the footsteps of Semret Medhane (Col.) and Mohammed Ahmed (Captain). He recalled that Ethiopian Airlines was an early entrant into intracontinental air travel, primarily operating East-West routes. However, it has yet to establish sufficient flight paths to North African countries like Morocco or Algeria.

"What works for one carrier may not work for the other," he said, noting that it took eight years for Ethiopian flights to China to become profitable. Ahmed believes that the Airline's professional staff, reputation for safety, and financial resources can help it outcompete smaller carriers for greater market share.

"There is insufficient publicity of its strongest qualities," he said.

Ethiopian Airlines Group’s modern fleet, extensive network, and strategic planning have cemented its position as a leading carrier in the African aviation industry and beyond. Its hub-and-spoke model enables convenient connections for travellers between different parts of Africa and international destinations. The Group’s flights to New York, Washington, D.C., London, Frankfurt, Dubai, and Beijing are crucial for business and leisure travel, as well as trade and tourism.

The Airline boasts an impressive fleet of over 130 aircraft, including Boeing 787 Dreamliners, Airbus A350s, and Boeing 777s. The diverse fleet allows it to serve a wide range of destinations, from regional short-haul flights to long-haul international routes.

“The modernity of its fleet stresses the Airline's commitment to operational efficiency, passenger comfort, and environmental sustainability through reduced emissions and improved fuel efficiency,” the Airbus study noted.

The report showed the benefits of incorporating new destinations into an established hub-and-spoke network, using nonstop flying services to generate additional traffic and revenue.

The Lagos-North America route is also severely underserved, with only two routes operated by foreign carriers connecting them throughout 2024. Ethiopian Airlines has leveraged its fifth freedom rights to carry passengers and cargo between foreign countries en route to/from Ethiopia, maintaining a presence on the Lagos-New York route since October 2022. Ahmed believes that many African airlines could benefit from intercontinental integration, as several have technical or infrastructure deficiencies.

"Ethiopian can attract the most reliable types of partners," said Ahmed, who stayed with Ethiopian for three years before he was replaced by Bisrat Negatu in 1997.

Ethiopian Airlines has codeshare agreements with nearly 38 other carriers, allowing them to publish and market the same flight under their airline designator and flight number. Its partnership with Lufthansa, for example, provides additional connectivity to various European destinations, complementing Ethiopian’s flights and offering greater flexibility for travelers. It also has ownership stakes in African Sky (ASKY) in Togo, shares in Zambia Airways and Malawi Airlines, and a subsidiary in Mozambique. It was on the verge of becoming a major shareholder in Nigeria Air before the project was suspended.

The Airline captures the lion’s share of traffic between Abuja and Nairobi, despite established carriers' hubs in both countries. Ahmed sees Ethiopian's business model as well-suited for partnerships with domestic carriers without compromising service delivery.

"Careful selection of routes with competitive advantages matters now," he told Fortune.

Ethiopian Airlines’ route network is equally expansive, connecting Addis Abeba to over 127 international destinations across five continents. It flies to more than 60 cities within Africa, making it the largest carrier on the continent in destinations served. Major African cities such as Johannesburg, Lagos, Nairobi, and Cairo are part of its network, facilitating essential intra-African connectivity that drives economic integration and development.

The Airline's operations on the Cape Town-Brussels route have seen traffic growth alongside competitors like Emirates and Lufthansa. According to the study, Ethiopian Airlines' ability to stimulate traffic and capture market share through competitive services shows its potential to operate on other unserved or underserved routes successfully.

PUBLISHED ON Jul 07,2024 [ VOL 25 , NO 1262]

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