Zemedeneh Negatu has advised on numerous deals across the continent, not least the partnership agreement between Ethiopian Airlines (ET) and Asky, the regional airline based in Lome, Togo, and operating across West and Central Africa.
Despite numerous failures in the aviation sector in Africa going back 40 years, he is still highly confident that the aviation market in Africa is untapped and that ET, an airline he knows well, should be used as a model to replicate in other countries. "Look, 80% of air travel from or to Africa is done by non-African carriers--80%! So, African carriers only carry 20%. I think that's telling. We need to fix that. We need to promote African owned and operated airlines which could compete globally."
Too often, he says, African airlines are vanity projects. But really, one should leave the egos and issues of pride behind and focus on the numbers and making an airline commercially viable.
Negatu sees governance and policy as the main issues affecting struggling airlines. In terms of governance, airlines have simply not been run properly. "This is a low-margin business," he says, "and every penny counts. Your best run airlines clear 7-8%, and that's it". This is why he feels African carriers should partner and not operate as stand-alones. "In Europe, there are four major airline groups. In Africa we have too many tiny little airlines trying to make money operating on their own ."
Saving just 50 basis points on financing costs--and airlines are capital intensive businesses--matters and this is one of the reasons he feels that Asky has benefited from partnering with ET. The airline's excellent track record with aircraft manufacturers, leasing companies and credit export agencies such as the US Exim bank means that Asky will benefit from considerably lower borrowing costs than a new stand-alone national airline with no track record.
Throughout our interview, Negatu cannot but sing the praises of his national carrier, but he does so with sincerity. "For the last three years in a row, they've made more money each year than all of the African airlines combined, in terms of profitability. They've grown from about a million passengers 12 years ago; this year they should top 10m. And they've gone from about 12 ageing aircraft to almost a hundred new ones with an average age of five years and a four-star Skytrax quality rating, similar to British Airways and Emirates.
"So, they've done extremely well. But they are the...