Ethiopian wins race for home-based carrier

Ethiopian Airlines (ET) has been selected as strategic partner a for the proposed new home-based carrier, B&FT sources have revealed.

At exactly 6pm Ethiopian Time on Tuesday, December 4, 2018, a Memorandum of Understanding (MoU) was signed at ET’s headquarters to signify government’s undertaking to work with ET in establishing a new home-based flag-carrier.

ET is expected to own a maximum of 49 percent stake in the yet-to-be created entity; government 10 percent; and a 41 percent stake made available to other investors.

Goil, Teachers Fund, GLICO, and Africa World Airlines (AWA) are some indigenous companies which have expressed interest in investing in the proposed home-based carrier.

A final agreement is expected to be signed before Christmas. The airline is also expected to start flying early next year.

Ethiopia’s desire to partner government in the establishment of a new flag-carrier fits perfectly into its grand project of improving air connectivity on the continent and deepening its footprints through strategic alliances.

Ethiopian Airlines holds a 40 percent stake in pan-Africa carrier Asky Airlines, and has been its technical and strategic partner under a management contract for over five years now.

In July 2018, ET also bought a 45% stake in Zambia Airways as the Southern African country sought to revive its flag-carrier – which collapsed in 1994.

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The airline already has hubs in Togo and Malawi but is also in advanced negotiations to establish hubs in Chad, Mozambique, and Equatorial Guinea. It is also in contention to partner the Nigeria government in reviving its collapsed flag-carrier.

Need for a home-based carrier

The desire to establish a new home-based carrier after the collapse of Ghana Airways – a fully state-owned entity – and the subsequent collapse of Ghana International Airlines, established with private sector participation after the collapse of Ghana Airways, stems from growth in the sector experienced on the continent and the industry’s future potential.

Huge investments in on-ground infrastructure, such as expanding the Arrival Hall of Terminal 2 and construction of Terminal 3 at the Kotoka International Airport (KIA); construction of a new terminal building at the Kumasi Airport; expansion of the Tamale Airport; reconstruction of the Wa airport and construction of a new airport in the Volta regional capital Ho, all require that a home-based carrier which will focus on operating domestic and regional routes before taking on the rest of the world be established.

Tewolde GebreMariam, Ethiopia’s Chief Executive Officer, told the B&FT on the sidelines of the Routes Africa Conference held in Accra in June that: “Yes, we have submitted our proposal and held discussions. [if we are chosen] we will operate domestic flights in addition to regional flights”.

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Analysts believe that the commitment by Ethiopian to operate domestic flights is very instrumental in their selection as strategic partner. This is expected to help the country maximise the huge investments made in airport infrastructure.

Potential for growth

Despite the Yamasukuro Decision reached some 20 years ago to liberalise African skies for African Airlines, there are still restrictions that have limited intra-African flights. The navigational charges on the continent, and specifically the West African sub-region, also remain high.

The challenges notwithstanding, the region’s population presents a great opportunity for any new entrant. With an estimated 350 million people – most of which are under 30 years – the region is one of the fastest-growing aviation blocs on the continent. The region also has a fast-emerging middle-class. There are people with sizeable disposable incomes who have the ability to travel.

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