Broken Wings : Why Private Airlines in Ethiopia Are Not Doing as Well as the National Carrier

Ethiopian Airlines, Ethiopia’s flagship national carrier, has been experiencing impressive growth by most measures. The Airline is continually adding planes to its fleet, is expanding the number of international destinations to which it flies, and is generally ranked as one of the most profitable airlines in Africa. Despite the Airline’s promising growth, the same cannot be said of the country’s private airline industry. Ethiopia’s private domestic airlines have had difficulty reaching the consumer market, especially compared to countries like Kenya and Tanzania. EBR’s Berihun Mekonnen explores the reasons why this is the case.

On the 8th of April, 1946, Ethiopian Airlines, Inc. made its maiden flight – from Addis Ababa to Cairo – in a Douglas C-47 Skytrain aircraft. Since then, it has been serving the nation’s international and domestic flight services uninterrupted. Furthermore, the country’s flagship carrier has grown strong and has become one of the most successful and profitable African airliners. It’s also consistently ranked as one of the most globally proficient airlines, owning state-of-the-art aircrafts, continuously adding international routes and destinations, and improving its organization and infrastructure.

But despite the robust growth and prominence of Ethiopia’s national carrier, the private aviation industry of the country lags behind. Compared to other African countries, such as neighboring Kenya and Tanzania, Ethiopia’s private aviation sector is relatively underdeveloped. It has been unable to come out from these predicaments since it began roughly fifteen years ago and its growth has been sluggish. Private airlines have yet to emulate the successes of the national airline, which has become the pride of the nation.

Despite the fact that more than 30 companies have been licensed to operate in the private airline business, only a few are operational. Close to 20 of the licenses given to these companies have been revoked, even after many of them have applied for renewals.

Those that are operational are all involved in charter and taxi services and are usually contracted out to exploration and mining companies, the diplomatic community, international NGOs and, in some instances, for tourists. 

None of them are engaged in providing scheduled domestic flights, which could prove instrumental in improving the country’s transportation system. Many in the sector complain that they are not getting the necessary support from concerned government institutions. They also feel that the sector is highly regulated and restrictions hinder their growth and expansion.

“Restriction and limitations usually hinder creativity and the aspiration to grow,” says Captain Solomon Gizaw, managing director of Abyssinian Flight Services, the first private airliner in the country, when discussing the implications of regulations on the airline industry. He believes that these regulations and restrictions have crippled the growth of the sector. “The sector is over regulated and underserved,” adds Captain Abera Lemi, CEO of National Airways, another private airliner.

Number of seats and age of air-crafts

On October 27, 2014, the first scheduled flight by a private airliner, Trans Nation Airways (TNA), a Midroc-affiliated company, made its maiden flight.  TNA launched its domestic flight from Addis Ababa Bole International Airport to Bahir Dar and Gondar twice a week and to Humera once a week. The flight was realized after the Airline negotiated and agreed with the Ethiopian Civil Aviation Authority (ECAA) about the flight schedules and destinations. 

The most oft-repeated grievance among the private airlines is that they are not able to engage in domestic scheduled flights. This is mainly because of the limitation of the number of seats a private airline aircraft is allowed to have. Until recently, aircrafts were limited to twenty seats, though that number has now been changed to fifty.

The number of seats is the most important factor in determining the fares of transport services, which is pivotal for competition, according to private airline operators.  For them, it is very difficult to compete and be profitable with this number of seats for scheduled commercial flights.  

Many in the sector don’t understand the reasons for placing a limitation on the number of seats. Some suspect that the government is imposing these restrictions in order to protect the government-owned airline from domestic competition.

There are no other countries that limit the number of seats in the private airline business, according to Capitan Abera. The challenge, he claims, is solely placed on Ethiopian private airlines. “It is only when we have a scheduled flight that we can generate sustainable income. We have fixed costs, which may not be covered by charter or taxi services,” Abera explains.

But perhaps the most pressing issue related to regulations on the private airlines, according to industry insiders, is the age limits on aircrafts that are allowed to operate. The ECAA prohibits aircrafts more than 22 years old from being used. Private airline operators say that almost all the aircrafts that meet the required seat number by the Authority are older than the age restriction. 

“There aren’t any new aircrafts in the current market that have this small a number of seats [that would be allowed to operate] in Ethiopia,” says Solomon. “The aircrafts produced recently usually have more than 75 seats. We can’t build what they are requiring of us,” he told EBR in disappointment. Government authorities seem aware of the challenges related to the limitation of the number of seats since they often hold stakeholder discussions. 

Government officials state that these regulations and restrictions are related to the safety and security of passengers, according to Colonel Wosenyeleh Hunegnaw, director general of the ECAA. “The restriction on the age of aircrafts is a safety issue which we will not compromise,” he says. “We have seen data from many African countries and one of the reasons for plane accidents is their age. The issue of safety is for everyone, those that take part in the business as private airliners, the Ethiopian Airlines, and most importantly for all of us as a nation.”

The importance of the air transport sector in Ethiopia cannot be overstated, according to Wosenyeleh. Since Ethiopia is a landlocked country, air transport acts like an unofficial port, helping connect the country to foreign commodities and exchange. Wosenyeleh argues that there is no reason to create obstacles to allow private airlines to operate. The issue, according to the director, is that the sector is highly capital intensive; highly regulated because of safety issues; needs skilled manpower and the competition is stiff.

According to the director, another challenge for private airliners is capacity limitation.  “I doubt they will be able to buy these new aircrafts if the restrictions are lifted,” he told EBR.

When talking about domestic scheduled flights, Wosenyeleh notes that the Ethiopian Airline’s (EAL) service in the domestic air transport is not always a profitable enterprise. There are routes that are profitable and there are routes that lose money, says Wosenyeleh. The Airline compensates one for another and even subsidizes these unprofitable routes with earnings from its international flights. 

The private airlines want to participate in the lucrative routes (markets) but not the others, usually at the expense of the EAL. All things considered, the government doesn’t directly restrict the private operators from the participation of domestic scheduled flights; the number of seats is rather a technical standard and obligation to the private airlines. Policymakers are discussing drafting a new air transport policy that the director hopes will make a significant change.

“Any change, however, won’t be significant and will not make any difference at all in the general aviation,” says Capitan Solomon. “The limitation of the seats wasn’t logical from the beginning,” he adds.

Airport services

Another common complaint from private airlines is the services they receive at airports. Besides mistreatment at airports, they cite the lack of hangars for aircraft maintenance as one of the major challenges. 

Most of the private airline companies take their aircrafts to Kenya or South Africa for maintenance. “Because we don’t have hangars for the maintenance of our aircrafts, we take them to Kenya, which costs substantial money and time, which would otherwise be used for building our capacities,” says Firehiwot Tessema, general manager of Aquarius Aviation. “Though Aquarius is not interested in participating in scheduled flights, since we focus on chartered and taxi services. Capacity limitation is the only challenge of the company.” 

“It has taken 15 years for Abyssinia to get a land on which to build a hangar. During this time we have been taking our aircrafts to Kenya, burning fuel and company costs,” says Solomon. Other airlines express similar frustrations. National Airways takes its aircrafts to South Africa for maintenance purposes because they equip private airlines with hangars there.

All of the private airlines are based in Addis Ababa and use Bole International Airport to provide services. The airports provide services to several airlines, including locally based private companies. According to the Ethiopian Airport Enterprise, some airports have even been able to provide land for airlines to build their own hangars. 

Financial and other support

The country’s investment law bestows the right to invest in the air transport sector in Ethiopia to Ethiopian nationals only. However, the sector hasn’t received the necessary attention from the government, according to some private airline operators. 

Many industry insiders say that it’s difficult to access credit services from financial institutions. Banks, including the publicly-owned Commercial Bank of Ethiopia, don’t have the capacity to meet the financial demands of most private airlines, according to sources.

One of the requirements to work in the air transport sector is to own or lease an aircraft. Though many have registered to get licenses to be engaged in the sector, only a few own aircrafts and have been operational, while most of them don’t own a single aircraft, according to ECAA. The Agency has declined to renew the licenses of 20 private domestic airlines and other aviation businesses on the grounds that they have been using their licenses to do illegitimate business, such as winning contracts and subcontracting them by snatching the jobs of other companies that are operational.

Kaleyesus Bekele is a seasoned journalist at the Reporter newspaper and has been following the development of the sector for more than a decade. He observes that the sector is at a crossroads. Foreign nationals are not allowed to invest in the sector, he says, and since the airline business is capital intensive and it needs technical skills, investors are not interested. Local investors who have joined the sector have limited financial resources and find it difficult to access bank loans, he explains.

Looking forward

A new air transport policy is currently being drafted and policymakers are discussing it at length, according to Wosenyeleh. “The process will involve stakeholders at all levels in order to make it more inclusive and I hope the policy will alleviate challenges and complaints private airline companies raise all the time.” 

“There shouldn’t be any limits,” he argues. “It is because everything is open and free that Virgin Atlantic, a private airliner, is able to transport people to other places,” Abera says.

“The government should consider the private airlines as development partners,” says Kaleyesus. “The first thing that the government should do is to sit down with the private airline owners and listen to their challenges. The ECAA does that at least once a year but the Minister of Transport and the Prime Minister should meet private airlines, owners and discuss the red tape and ways [to move] forward.” EBR

Berihun Mekonnen

EBR Staff Writter

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