Ethiopian Airlines Wants To Help Launch Nigerian Airline

Filed Under: Other Airlines

Africa is full of interesting airline stories. Ben recently wrote about the comical situation of Air Zimbabwe and their missing 777, as well as the promising progress RwandAir has made in acquiring an A330neo to start flights to New York.

Last month Ben wrote about how the Nigerian government planned to start a national airline, but realised they could not do it alone.

One of the biggest and most stable airlines in Africa is Ethiopian Airlines. Last year they saw a revenue increase of 43%, passenger increase of 21%, and made a net profit of around $250 million. They operate a huge network, adding new destinations and aircraft all the time, and I’ve written about my experiences stopping over with them in Addis Ababa before.

They are smart enough to recognise that Africa is a growing aviation market with plenty of opportunity in the right conditions, with the right strategy and management. Many of these African nations seem to have difficulty actually executing growth plans as, in Air Zimbabwe’s example, there is corruption at senior levels stopping a country trying to launch an enterprise such as an airline.

But Ethiopian is no stranger to investing in and developing African airlines. I was unaware of this, but they already own stakes in ASKY Airlines in Togo, Malawian Airlines, Chadian Airlines, Zambia Airways, and Guinea Airlines.

Admittedly I didn’t know many of these airlines actually existed!

Nigeria Air

The Nigerian government has publicly indicated it wishes to re-launch a national airline. So it has invited other airlines and foreign companies to tender to assist with building the airline for them, and operate the airline as a public-private partnership.

Air Nigeria interestingly used to operate as Virgin Nigeria Airways from 2004 to 2008, part of the then global Virgin brand which included Virgin Atlantic, Virgin Australia and Virgin America. Virgin then sold its stake in 2008 and the airline rebranded as Nigeria Eagle Airlines, and then Air Nigeria, operating 12 aircraft to 19 destinations until it was grounded for safety concerns in 2012.

Prior to their grounding in 2012, Air Nigeria operated a mix of Airbus A330s, Boeing 737s and Embraer E190 aircraft.

It is not unusual for foreign airlines to assist in developing new airlines – while Etihad Airways Partners is an example of just how badly this can goQatar’s investment in Meridiana and rebranding into Air Italy is an example of a wealthy, established airline using their scale, efficiencies and expertise to grow aviation where they see opportunity to do so. So far that investment seems to be going quite well.

Ethiopian Airlines has formally submitted a tender response to operate this airline. While Ethiopian is conservative with their chances of winning the tender, they are part of a consortium that believe they are the front-runners for being awarded the project.

What would this new airline look like?

Some countries have foreign ownership cap laws which do not allow foreign investors to control more than 50% of an airline. Qantas is an example of this – it will never be majority foreign owned.

But Nigeria has no such law, so this would allow Ethiopian Airlines (or the consortium they are a part of) to take a majority, controlling stake in the airline and dictate the direction in how it is built and operates. This gives them an enormous amount of strategic and management control and could be very lucrative if profitable.

The Nigerian government stake could actually be as low as 5%. They must be very keen for a national airline if they are willing to give up so much of it to begin with!

There is scarce information about the aircraft structure or exact route network, but the Nigerian government intends for the airline to operate domestic, regional, and long-haul flights.

Critically, the Nigerian government has agreed that it will have no say in the appointment of the airline’s management or operations. This seems to be a critical step in African airlines — if you have the wrong people controlling the airline they will lead it in the wrong direction. We have seen this time and time again with airlines like Malaysia.

New aircraft are fuel efficient and under the right conditions can be operated profitably. I could definitely see Nigeria Air either purchasing new, fuel efficient aircraft like the Boeing 787 to commence longer flights to places like London and Johannesburg (which they used to operate with A330s until they were grounded). And every African airline seems to plan to fly to New York, so a 787 could be a realistic option to fly this route.

Alternatively, they could relaunch more like a budget brand for Ethiopian. They could lease Ethiopian’s older aircraft, and have a lower cost model to operate older planes with cheaper prices.

But Nigeria is a fairly wealthy African country, so I expect they will go full-service.

Bottom line

I find Africa to be a fascinating aviation market.

There is so much opportunity for growth but for every success story like Ethiopian, there are several horror stories like Air Zimbabwe and South African Airways. The strategy of minimal government involvement in the relaunch of Nigeria Air seems to be the best strategy to take to avoid corruption, poor decisions and wasted money, and Ethiopian seem like a natural fit to launch the airline in the region.

I’ll be keeping an eye on how the tender is awarded and how the airline is launched. I have no immediate plans to travel to Nigeria – to be honest I’d rather give my money to RwandAir as they seem like ‘the little airline who could.’

Would you fly a relaunched Air Nigeria?

Comments
  1. Fairly wealthy? Need i remind you Nigeria is Africa’s largest economy. We also defined have bo shortage of wealthy individuals and businesses.

  2. The Nigerian airline market is right now going through some turmoil. In addition to this airline, there are 2-3 others attempting to launch. Each is essentially backed by a different wealthy Nigerian business person and a different government official who they need to support them. Regardless of the official say in operations, government officials have full power to make the business financially viable or politically in feasible.
    Ethiopian through Asky in particular has created the most credible demonstration of how new airlines can be successful in without government sponsorship, so I hope they win the proposal!

  3. A few comments :

    1) The government of Nigeria already owns equity in a handful of airlines as public-private partnerships. These include Arik Air which reached the point of near insolvency at which time it was partially nationalised (some assets taken over by Asset Management Corporation of Nigeria – AMCON) to prevent a complete shutdown as it was deemed a strategic national interest and “too big to fail”.

    2) The Government of Nigeria actually approached ET after AMCON’s takeover of Arik’s assets with a proposal for ET to take over management of Arik. It was evaluated at the time and ET walked away as they felt that the rot at Arik was too deep. However, ET has to keep the Nigerians friendly as Nigeria is a huge source of ET’s revenue (they fly to Lagos, Abuja, Kano, Kaduna and Enugu) and in the past they have been restricted from repatriating their earnings out of Nigeria when they have upset the Government. Whether this is simply one of those moves to appease the Government of Nigeria by indirectly lending their name to the venture at the beginning to build credibility, or whether they genuinely intend to be involved as a minority stakehoulder, remains to be seen.

    3) ET’s strategy of partnership/investment in other African carriers to support the “multiple African hub concept” has been around for 15 years since the days of Ato Girma Wake. Tewolde has inherited and built on the strategy (he was part of the Executive Team too back then although not in charge of this area – Tewolde was in marketing while Kinfe Kahssaye drove their strategic projects). Their initial plan was an investment/strategic partnership with Ghana’s new national airline in 2004-5 which was fully negotiated and ready to close, but that deal fell through at the last minute due to local Ghanaian politics. They then moved their focus to Togo next door and the result was ASKY which has grown from strength to strength, but with very strict Ethiopian management control. Malawian Airlines is another carrier where ET maintains strict management control despite a minority stake. Other deals in Africa have fallen through over the issue of management controls – ET has shown its willingness to walk away if their conditions are not met. Tewolde is no fool and despite the huge expansion of ET under his watch, is actually a very conservative manager with a low risk appetite. The anti-James Hogan if you will.

    4) Of the airlines you listed, only ASKY and Malawian are actually operating. The “partner” airlines in Guinea, Chad, Congo and Zambia are either dead in the water or still to launch.

  4. I won’t fly it, have had my share of African airlines of the previous generation, Air Afrique, Cameroon Airlines, Air Madagascar (a survivor…), Air Gabon and the like but it is true that Ethiopian is probably the only engine with a chance to reactivate African Airlines. They have been VERY disappointed with Asky ( but who wouldn’t given the Togolese corruption and inefficiency) and have still managed to keep it afloat.

    Nigeria is better placed than Togo to route long haul flights from Addis to North America via Lagos, and if anybody can handle the Nigerians, it is Ethiopian.

    Pan Am (remember them?) had a wonderful announcement touching down in Lagos on their JFK-Dakar-Monrovia-Lagos-Nairobi… “Transit Passengers may disembark if they wish to do so but we advise them not to”. A favorite trick to accomodate overbooked Nigerian passengers was for the airport police to seize transit passengers under some pretext and to give their seats to those individuals for a bribe.

  5. I was talking to a Nigerian airline executive just a few weeks ago and he said they were “very close” to getting the national airline up and running. We just happened to cross paths while traveling in a third country – I have no specific insights on this, but am watching closely. Nigeria would indeed be a huge market for a well run airline if politicians and cronies can be kept at arms length. Its middle class is larger than the entire populations of quite a few European countries. When I was in Israel and West Bank a few months ago, it seemed several times there were more Nigerian tourists than Westerners around. Lagos-Tel Aviv will be an excellent route, I predict.

  6. I think Ethiopian should first work on their own internal management as they are one of the most disorganised airlines I’ve ever flew in my life. Their airport transiting process is very inconvenient and most of their employees are also lost. I missed my flight because I was told wrong infos by 3 different employees and Bole airport doesn’t have PA anmouncements, their TVs don’t display the correct information or one is about flights are missing. The employees are very rude and bottom line disrespectful to passengers and they storm off while you are still talking to them or trying to communicate with them at the counter. I can’t imagine how disorganised the other airlines they are trying to start up will be, where many of their operations have many flaws that really negatively affect the passenger’s experience. I recently flew with them, and had the worse expensive of my life, and I wrote an article about it, and hoped to share it with people, but I haven’t figured out how to do that yet. However, to be fair, I think the airline is growing, and they have good business strategies, which is really important to any airlines. But I just truly feel they are really lacking the effort in making the passenger’s expensive on board and at the airport acceptable, and also their own reservations systems and their websites.

  7. @Junse You are absolutely right, but in spite of all this, they are by far the best and most efficient airline in Africa.

  8. @Junse – I have flown nearly 200 sectors with Ethiopian in the last 5 years and cannot disagree with you more. Ethiopian is one of the best managed airlines in the world – their success and profitability are evidence of this. Certainly, their Addis hub is infrastructurally constrained until the new terminal is ready and can result in a sub-obtimal experience for non-status/economy passengers, but the fact that you (and your bags) can still make 20 minute connections there in the middle of a hub bank without breaking too much of a sweat is remarkable. There is nothing fancy about flying with Ethiopian, but they will usually get you safely and reliably to your destination more or less on time – which is better than any other airline in the region is able to do.

  9. If ET can control the dominant hub in West Africa as well as its existing East African hub, it will have a choke hold on the continent. It would also suit Nigeria for Lagos to become the major hub.

    One could see Royal Air Maroc also being interested though.

  10. A strong and reputable Nigerian Carrier, especially on the international sector is long overdue and intra-African connectivity is key to the growth of the African economy. It will take experienced and successful airlines to assist and build Nigeria Air. Ethiopian is a successful African & International Carrier and Qatar is one of the Top 10 Airlines in the world. I wish them both “Good luck” in their bids. The winner will need experienced executives in the industry to help with the launch activities and lay the foundation for success and either Carrier will be able to attract the right candidates.

    YES! I will fly Nigeria Air as I have full confidence in the commercial and business acumen of either Ethiopian or Qatar Airways. Go Nigeria Air Go!

  11. Is there any chance that these ET partner airlines flights eventually can be purchased with Star Alliance miles? I’m hoping to fly with the new Chadian airline in 2019. The flight is purchasable on ET’s website with an ET flight number using money but currently not miles.

  12. @ AM do you mean using ET miles? The partner flights should be bookable with those miles but not with other Star partner miles (ie United miles).

  13. I was hoping for United miles, but when I try to buy with Sheba Miles, the flight doesn’t come up at all on ET’s website (and I doubt the award seats are sold-out because it’s 8 months away and an obscure route: NDJ to NIM on July 4).

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