12 June 2018

Ethiopia: SOE Beating the Odds

Ethiopian Airlines announced that it had acquired its 100th aircraft, a Boeing 787-900, early June. The news received wide media coverage as everything about Ethiopian Airlines seems to generate every now and then. It has been reported that it would be the first time for an African airline to operate a 100-aircraft fleet in the history of the continent.

However, such a landmark is not new for the airliner. It usually wins numerous trophies in a single year. Ethiopian Airlines was the first to avail jet service in the continent back in 1962, and operated the first African B767 in 1984; the first African B777-200LR in 2010; the first African B787-800 Dreamliner and B777-200 freighter in 2012; and the first African A350 in 2016; and the first African B787-9 aircraft in 2017. It now operates as one of the youngest and most modern 100 aircraft, with an average age of less than five years.

Ethiopian Airlines has always been very successful but the leaps it took this past few years in terms of the number of destinations it took, the number of passengers it transported and the general recognition it wielded internationally are unique by its own standards. Its profitability and rise to prominence seem to go on non-stop.

Considering the Airliner is a State Owned Enterprise (SOE), the general assumption is that it would be liable to below par administration. However, the success it has registered not only at continental level but at the world stage comes as a complete drift from the norm. International organizations like IMF and the World Bank nag Ethiopia to have the Airliner privatized although the grounds for privatization are totally absent. Better administration is the reason behind the widespread privatization of SOEs across the globe. It would, however, be silly to accuse Ethiopian Airlines of administrative problems as it has managed to sustain its incredible success for so long.

As much as the state owned flag carrier has maintained itself as the pride of the country, the fact that other state owned enterprises (SOEs) have not proved to be as effective raises questions - what can the other state owned organizations learn from Ethiopian Airlines? To answer that question, let's consider the unique features of the Airliner that have helped it achieve its status as one of the best in the world.

Ethiopian Airlines was established in 1946 as a joint venture with American Airline Trans World Airlines (TWA). The website states that three quarters of the Airlines' staff were Ethiopian by 1953 with expatriates holding key posts. The first Ethiopian General Manager, Colonel Simret Medhane, did not come into office until 1971. Some attribute this long period of management by expatriates as the basis for the Airlines' illustrious success.

However, the Americans' legacy could have been ruined quite easily had the organization been tampered by the subsequent political regimes that came to power. Despite the ideological change that brought socialism along with the military Junta in power, the Ethiopian Airlines maintained a unique sense of independence as it was allowed to purchase aircrafts from the American company Boeing and other capitalist countries. A Masters paper by Selamawit G/Egziabher states that the services of the Airlines crashed by the end of the 1970s and the Derg regime reacted by designating Captain Mohammed Ahmed as the Chief Operating Officer in 1980 who ran the Airlines on a strictly commercial basis. That is a clear indication of the fact that the Airliner was treated as a source of national pride left alone to pursue its bigger ambitions.

The same reality works when the current regime led by EPRDF assumed state power. The Ethiopian Airlines still maintained its sense of independence and its recognized role as the pride of not just Ethiopia but Africa as well.

The paper states that the success of the Airline emanates from a management system led by a board and power is decentralized that business activities of the company would be handled very well. The board members appoint a Chief Executive Officer for the company whose term is not determined. The researcher argues that the indefinite tenure allows the CEOs amass experience wielding them as good decision makers. Besides, the management structure reveals that existence of specialization, accountability and good decision making ability due to long time experience.

Another factor she raises has to do with organizational structure. The researcher argues that the Ethiopian Airlines has developed its own organizational structure which alters itself based on the change in the business environment. Moreover, the researcher states Ethiopian Airlines is an enterprise which has a visionary leadership style that helps it to identify which way to go in order to achieve the intended plans. Yet another argument by the researcher is that the Ethiopian Airlines has a strategic plan that is strictly followed and thus most accomplished above plan. The researcher also states sound financial performance as another one of the reasons for the Airlines' success.

The researcher also raises some reasons as the training and sense of ownership of employees, autonomous management, state of the art technology it uses and the comparative advantage the geographical location of the country provides as other set of reasons for the success of the organization.

Even for other successful state owned companies such as the Commercial Bank of Ethiopia, ethio telecom and the likes, the stature of Ethiopian Airlines is incomparably huge and belittling. Despite the long history of success that has rooted itself in the organizational culture of the Ethiopian Airlines, other public enterprises seem to have failed to study the model and replicate the staggering achievements of the Airlines.

The government still needs to ask the questions: why have other public enterprises not been as successful as Ethiopian Airlines? What is it about Ethiopian Airlines that makes it stand out from the rest of the African and World Airliners? What structures have been useful in nurturing that uniqueness? How can the rest of the public enterprises be geared towards the same path in the long future? It should then strive to answer these questions as precisely as possible and set out to raise the standard of other public enterprises.

One last point is that there has been repeated interest from the greedy western companies and their cronies in international organizations to privatize the Ethiopian Airlines. In other words, they think that such a well crafted machine doesn't have to be in the hands of Africans and thus has to be sold to them. Although the government has been adamant in rebuffing such advances, their crafty approach to always push their cause through international organizations such as the IMF and the World Bank could leave the government between a rock and a hard place. No matter how intense the pressure is, the Ethiopian government needs to keep our flag carrier under the ownership of Ethiopians.

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