The Reporter (Addis Ababa)

Ethiopia: "We Are a Pan-African Airline"

ASKY [meaning African Sky] serves 22 destinations in West and Central Africa with seven passenger and one cargo aircraft. Ethiopian Airlines is the strategic partner of ASKY with the former owning an almost 40 percent stake. Every week the airlines operates over 100 flights and carries more than 10,000 passengers. The airlines celebrated carrying its millionth passenger in March 2013. Kaleyesus Bekele of The Reporter last week interviewed the chief executive officer of the airlines, Yissehak Zewoldi, at his office in Lomé, Togo. Excerpts:

The Reporter: How was ASKY established? Yissehak Zewoldi: In the demise of Air Afrique (a defunct West African Airline) early in 1980, a serious air transport gap was created in West and Central Africa. In 1998 leaders of the Economic Community of West African States (ECOWAS) got together and decided to establish a regional airline to facilitate air travel within the regions. Then a commission was formed.

The team was led by our board chairman, Gervais Koffi Djondo, a former minister (of Togo), and a visionary and successful entrepreneur who was instrumental in the establishment of the now famous ECO Bank. They hired consultants who work on the establishment of the new airline and they were looking for a strategic partner. After several attempts they came to Addis Ababa to present their vision and discuss possible cooperation or partnership with Ethiopian Airlines.

That was how the partnership between ASKY and Ethiopian was born. Ethiopian Airlines did its own study and totally modified the initial study that was prepared by the consultants. The consultant's idea was more or else to duplicate the old Air Afrique network. The Ethiopian's proposal suggested that the new airline should first focus on serving the regional market (in west and central Africa). After several discussions it was agreed that Ethiopian Airlines would take over the management of the new airline for a period of five years.

Wasn't there any disagreement between the founders of ASKY and the management of Ethiopian Airlines on the business plan of the new airline? The founders wanted the new airline to serve the intercontinental and regional markets while the management of Ethiopian wanted to initially focus on serving the regional market until the airline is well placed in the market place.

No, there was no disagreement. Ethiopian proved to them the rationale behind the focus on the regional market by demonstrating the benefits of regional service. The new study has lots of merits. First focus was given to connecting the regional cities and commercial centers. Second, Ethiopian Airlines proved to them that for a new airline (at early age) venturing into a mature and highly competitive international market to be very risky and unsustainable. So ASKY was established in 2009.

It was established in 2009 and the first flight took off to Ouagadougou, Burkina Faso, on January 15, 2010. Tell us about your market share in the region.

Initially we had some bilateral issues with some countries and we were unable to secure operating permit to a number of countries. That was a real challenge. Still, we have some bilateral issues. The Yamoussoukro decision (the declaration that allows African countries to open their skies for African airlines) is not still fully implemented. Why are African countries denying African carriers traffic rights?

The reason is very simple. It is because they want to protect the interest of their own carriers. But ASKY was established by the private sector in West Africa to serve the underserved west and central market. How can the countries in West and Central Africa deny it an operating permit?

It is very unfortunate but that is the truth. ASKY is totally different from the other airlines in the region. First it is a one hundred percent privately owned airline. Second it is a community airline. If you look at the composition of our staff we come from 35 different African countries. This is very unique. So that is why we claim that we are a Pan-African airline. We serve Africa and the company is owned by Africans. It is wholly run by the sons and daughters of Africa.

But the sad truth is that you cannot fly to an African country without having an operating license, which is often difficult to secure. You cannot fly to Angola or Nigeria even if you are an African carrier. How much is Ethiopian's stake in the company?

Initially it was supposed to be 25 percent but because of few unpaid capital, ET's share now stands at about 40 percent. You said that you still have bilateral issues with some countries.

Yes, we have all the necessary licenses and we have an Air Operator Certificate (AOC) from the Civil Aviation of Togo. But due to some outstanding bilateral agreement issues we are unable to get operating permits to some countries in Africa. We are based in Lome but we are not owned by the Togolese government. But the support we are getting from the Togolese government is tremendous and we are very grateful for that. They have been supporting us right from the inception of ASKY.

How many destinations are you serving now? We are currently serving 22 destinations in West and Central Africa. Can you tell me about your fleet composition? Currently, we have seven passenger and one freighter aircraft. Compositionwise we have three Boeing 737-700 and four Bombardier Q 400. The all cargo aircraft is a B737-400. The Bombardier aircraft are all brand-new and first of its kind worldwide with dual class of service. What is your next plan?

We have prepared a five-year development plan. The board of directors is expected to approve the plan soon. According to our business plan, we will add four more new aircraft in the coming few years.

What type of aircraft?

We are open to explore all types of aircraft but realistically we may go for the Boeing 737-800 aircraft. Why do you specifically need this aircraft?

Because it gives us 50 more seats. We have some routes that demand additional capacity. The first aircraft will join our fleet this year and we intend to arrange the deal on a lease-purchase basis.

How many additional routes will you open according to your five-year plan? We will open 11 new routes by giving priority to some niche markets. Will all be in West and Central Africa?

In the next five years we will venture out to East and Southern Africa and we will also go transcontinental by flying to Beirut. We are also exploring the possibilities of serving a couple of European markets in partnership with Ethiopian Airlines.

So you have plans to fly to Europe.

We have not included that in our five-year plan but there is discussion going on with Ethiopian Airlines to serve some European destinations. Ethiopian Airlines have aircraft that stay overnight in Paris and Brussels and we want to use the ground time of these aircraft and provide good air service to West Africa. It is a little premature but rest assured this project will materialize in the near future.

Where do you want to fly in East and Southern Africa?

Johannesburg is our first choice in Southern Africa. Luanda is also another choice. We are also looking at another destination in East Africa. Is it in Uganda or Tanzania?

We have not decided yet as we are still exploring the market situation in East Africa in general. We are conducting a thorough market study to identify which destination easily fits into our network. Can you tell me about Ethiopian's involvement in running ASKY?

Ethiopian Airlines right from the start of the project has been fully committed and actively participating in the establishment and successful launch of ASKY. Ethiopian Airline's assistance in helping ASKY securing AOC (operating certificate) was crucial. A team of highly qualified and professional staff were assigned to prepare us secure the AOC. It was quite a task! Especially taking the limited timeline given into consideration, the team carried out an impressive and successful job.

Based on the management contract between ASKY and Ethiopian Airlines, a management team from Ethiopian Airlines headed by Busera Awol simultaneously started recruiting staff and the day-to-day operation and marketing of the airline. As mandated by the management contract, critical positions were held by ET staff. I would like to take this opportunity to express my highest appreciation to the Ethiopian team who highly contributed to the establishment and running of ASKY during its infancy. To mention a very few names Busera Awol, former CEO of ASKY, Getachew Belete, Director of Technique, Haile Gebrehiwot (Capt.), Director of Flight Operations, Meseret Bitew, Finance Director Getachew Tadesse, Ground Operations, and Seblewongel Azene, Marketing Support. Over and above this, special appreciate goes to our board of directors, Tewolde Gebremariam, CEO of Ethiopian, and the management and employees for the unparalleled support and continued guidance to the success of ASKY.

Who are your competitors in this region? We have a number of competitors like Air Senegal, Air Cote d'Ivoire, Camecor (a new Cameroonian airline), Arik Air of Nigeria and Air Burkina to mention a few. How do you describe the market in West and Central Africa and how do you see the competition?

The market in West Africa is a growing market but unfortunately some markets are highly seasonal. However, we have a solid network that covers the ECOWAS and Economic and Monetary Community of Central Africa (CEMAC) countries and beyond. We have already established a good brand name in our territories and the feedback we are receiving from our customers are very encouraging. We are the most dependable carrier in West and Central Africa with highly reliable schedule and over 90 percent on time performance. Businesspeople, government officials international organizations are our top customers. We are an airline of choice for these customers. We have the highest number of frequencies into major markets that is also an advantage. We give additional choice and flexibility to business travelers. We can say, very proudly, that we are a businessman's airline and that is why we have a very high load factor in business class. How is the competition?

The competition is there but with a well-established brand name, most dependable schedule and one of the highest on-time-performance in the region now is at par with ASKY.

You are claiming that you excel your competitors with service.

Yes we provide high quality service and dependable schedule. We have a very high on time performance.

Many people say that the West Africa region is under-served. Some complain that when they want to travel from one country to another they have to fly to Europe and come back again. Is that still the case? I should have mentioned that earlier. One of the factors that necessitated the establishment of a community airline in West Africa is the problem you just mentioned. When Air Afrique went bust a huge gap was created in air transport service. Travel from one West African country to another was made via Europe, Casablanca and East Africa. Now we have fully addressed that problem. We have connected all major West African cities. Now one can travel from one West African destination to another within the same day if not under six hours. Our Lomé hub is linking all the major cities in West and Central Africa. We are also feeding passengers to Ethiopian Airlines whereby our passengers could reach their final destinations to any point in the five continents.

How is the passenger traffic in the region?

The passenger traffic between some cities is not enough to support a point-to-point operations. So what we do is we tag cities. For example, to fly from Lomé to Kinshasa we need to fly to another point in order to gather more passengers. The traffic passengers on some routes are thin. It is a thin market but we deploy the ideal and most suitable aircraft, the Bombardier Q400, to serve these routes. In retrospect, the decision to select aircraft was a very wide one. Are you satisfied with the performance of the Q400s and their fuel efficiency?

We are very much happy with the performance of this aircraft. It is also fuel efficient and environment friendly. It is also helping us serve thin markets in West and Central Africa. That is a big advantage for us. Does Ethiopian provide you with MRO service (Maintenance Repair and Overhaul)?

Ethiopian provides us a hundred percent maintenance service. They render MRO service for our both Q400 and B737 fleet. An Ethiopian technical team is based in Lomé and they do line maintenance and 'A' Checks here while other major maintenance work is done at Ethiopian MRO center in Addis Ababa.

Can you tell us about your financial performance?

I don't have the details with me now. Usually, a start up airline does not make profit in the first few years of operation. We reached a break-even level last year as rightly projected in the initial plan. Now we are marginally making a profit. For a start-up airline the financial performance is very encouraging despite the high operating cost in the region. Why?

The price of fuel is very high. In addition, airport charges and taxes are cumbersome and ground handling fees are also exorbitant as there is a monopolistic environment at most airports. Are you a low cost carrier?

We are a hybrid airline between low cost and network carrier. Despite the high operational cost in the region our traffic and financial performance are very encouraging.

Can you give me some figures?

Not now. It has not been yet audited. We will provide you the details once it is being audited and approved by the board. The founding investors are also injecting more money for our expansion plan. How is the price of fuel affecting you?

Well the high cost of fuel is making our fares expensive. If you compare the price of fuel in West Africa with other regions, say East Africa, it is 20 percent more expensive and this makes fares unnecessarily expensive and thus affects our business.

How is your cargo business?

The cargo business is growing. There are landlocked countries in the region that need to transport some of their goods by air. We also have many traders in the region. We are giving more focus to our cargo business now that we have one dedicated cargo aircraft, a Boeing B737-400. We recently hired a highly experienced cargo manager and we have increased our market reach by working with many cargo agents and forwarders. What are the major challenges you are facing in addition to the rising fuel cost?

As I mentioned earlier, securing traffic right has become a serious challenge. Though we are a Pan-African airline we are denied operating permit by some African countries. Exorbitant taxes imposed on fares, high ground handling and airport charges are the major challenges. In some airports, it is only one company that renders ground handling services. So, it charges you whatever price it wants and you don't have another alternative since it has a monopolistic situation.

ASKY is a member of the African Airlines Association (AFRAA). Is there any effort that is being exerted to reduce airport charges and taxes in the region?

AFRAA has tried a lot. It lobbied governments to reduce airport charges and taxes so that it does impact airfares. But there is no change made yet. We do not still see light at the end of the tunnel when it comes to reducing exorbitant airport fees and taxes. Ground handling service is monopolized in almost every country and it is more than 50 percent higher than what we pay in other regions. Night flight operations is also another challenge that should be mentioned here as we cannot fully utilize our aircraft by flying during the day only.

Why? It is because of inadequate air navigation equipment at airports?

No. Most passengers in West and Central Africa do not want to travel at night because of security reasons as some airports in the region are 50 or more km away from the city and passengers do not feel comfortable to drive that far during the night. There are challenges for night operations but, where it is feasible, we need to do more to inform and create awareness on the advantages of night flights as passengers will save valuable time.

How is the security issue affecting you? There are conflicts in Mali, North Nigeria, Central African Republic, and the Democratic Republic of Congo.

Yes we have conflicts in the countries you mentioned and this affect our operations. Sometimes we are forced to suspend flights. The conflicts are very sad incidents and we feel sorry for those unfortunate people. From pure business point of view, these situations may also benefit an airline as there will be heavy demand for air service to transport UN staff, NGOs, diplomats, etc Ethiopian recently started flying to Brazil via Lomé. How is that helping you in increasing your passenger traffic?

Yes that it true. Ethiopian started operating three weekly flights to Sao Paolo and Rio de Janeiro with a stopover at Lomé. We collect passengers from West and Central Africa that want to travel to Brazil and feed Ethiopian at Lome and the reverse is also true as ET brings passengers from Brazil and transfer them to ASKY for travel to their final destination. Currently, on average we feed or de-feed about 40 passengers and we are confident that figure will grow substantially in the near future.

You moved to Lomé to assume your position five months ago. Where do you want to see ASKY say in five years time?

I want ASKY to remain a dominant airline in West and Central Africa. ASKY will keep connecting major cities and commercial towns in West and Central Africa with increased frequencies. It will serve destinations in Southern and East Africa. In the near future ASKY will also go transcontinental and in five years time it will serve a number of destinations in Europe. We are working on knowledge transfer and human resource development. We are planning to do some maintenance work on our own here in Lomé. We have already started training technicians and engineers at the Ethiopian Aviation Academy. We will work more on IT as we envisage to be a high tech airline with a big portion of our business coming from online sales. We are working on marketing the airline in different parts of the world. So in five years time I see ASKY as a successful international airline with a solid market coverage. Any final message?

East Africa, particularly Addis Ababa, is one of our major sources of passenger traffic. We see a number of passengers flying with us coming from one of Ethiopian Airlines flights. Currently, ASKY flights connect with ET at points like: Lomé, Accra, Abuja, Bamako, Douala and Abidjan and these connectivity expands our market reaches. So anyone who is coming from Addis Ababa, Nairobi or Entebbe can take Ethiopian Airlines all the way to one of these mentioned destinations in West Africa and continue onward to other detonations in West and Central Africa with ASKY.

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