Home Business Ethiopian Airlines Makes Record High Profit of 2.7 Billion Birr

Ethiopian Airlines Makes Record High Profit of 2.7 Billion Birr

Ethiopian Airlines
Ethiopian Airlines

AFRICANGLOBE – The fastest-growing airline in Africa, Ethiopian Airlines, on Thursday announced that it made a record high profit of 2.7 billion birr in the 2012-2013 fiscal year ended last June.

At a press conference held at the Addis Ababa Hilton, Ethiopian CEO Tewolde Gebremariam told reporters that his company made an operating profit of 2.7 billion birr, 165 percent up from the profit it made the previous year. The net profit increased by 178 percent from 734 million to 2.3 billion.

The airline generated a revenue of 38.5 billion, up by 14 percent. The airline transported 5.5 million passengers and hauled 174,000 tons of cargo during the budget year.

Stiff competition, high and volatile fuel price, and economic recession in Europe were mentioned as some of the challenges facing the global airline industry. Fuel expense now accounts for 50 percent of total operating expense. Poor airport infrastructure, the absence of visa waiver among African countries, high income tax, and airport duties are among the problems faced in Africa.

Tewolde attributed the remarkable performance of Ethiopian to the use of new, modern and fuel-efficient jetliners such as the Boeing B787 Dreamliner and B777 aircraft. Tewolde said the airline took delivery of 14 new aircraft (more than one aircraft per month) — four of them B787 and two B777. “We have deployed ultramodern fuel-efficient aircraft. If you take the B787, it uses 20 percent less fuel. So, using fuel-efficient aircraft contributes to the surge in the profit,” Tewolde told local and foreign reports.

The national flag carrier is expanding its international routes. In the 2012-2013 fiscal year, it opened nine new routes. “This also helps us in increasing our profit,” he said. “The hard work of our employees and the wise leadership of the management played a key role in raising our profit. Had it not been for the problems we encountered with the Dreamliner our profit would have been much higher than we have registered.”

Ethiopian Airlines received its first Boeing 787 Dreamliner in August 2012. The airline was one of the first customers in the world, and the first customer in Africa, for Boeing’s new-generation airliner, which entered revenue service in October last year with All Nippon Airways (ANA) of Japan. Ethiopian has ordered 13 of the aircraft. Currently, 859 Dreamliners are on order from 58 customers worldwide, and 15 are in revenue service. Other African carriers which have ordered the 787 are Arik Air, Kenya Airways and Royal Air Maroc.

The airframe of the 787 is predominantly made from composites, which account for 50 percent of the aircraft by weight. This makes the aeroplane significantly lighter than previous airliners in the same size category, thereby reducing fuel expenditure and thus costs.

Like any other new family aircraft the B787 has encountered some technical problems. The battery issue is the most serious one.

Following the incidents related to the battery issue that occurred in the Japanese carriers (All Nippon Airways and Japan Airlines) the the US Federal Aviation Association (FAA) instructed all carriers operating Dreamliner fleet to ground their aircraft last year. Based upon the recommendation of the US FAA, Ethiopian grounded its four B787s until the end of April for three and a half months. This has cost the airline direly.

In late April, the US FAA certified solutions proposed by Boeing to the battery issues allowing Ethiopian and other operators to retrofit the new and additional systems and resume flights with the Dreamliners. Boeing and Ethiopian engineers have been implementing solutions certified by the US FAA. Following the successful completion of the retrofitting work on the airplane and smooth test flight by Ethiopian pilots, the Ethiopian Civil Aviation Authority approved the commercial flight resumption of Ethiopian Dreamliner. Consequently, Ethiopian Dreamliners were back in the skies again.

The other incident occurred on board an Ethiopian B787 parked at the Heathrow Airport in London. A smoke was detected eight hours after it was parked. Fire fighters extinguished the smoke. The UK air accidents investigation Branch (AAIB) which has been investigating the incident reported that the smoke emanated from the Emergency Locator Transitter (ELT). Accoridng to AAIB, the ELT has its own battery and the smoke was caused by the failure of this instrument. AAIB said the cause for the failure of the instrument is yet to be established. ELT is found near the tale of the aircraft.

The top part of the fuselage at the back of the aircraft has been affected by the incident. Mesfin Tasew, chief operating officer of Ethiopian, said that experts of Boeing have assessed the damage the aircraft sustained. “It will take them two months to repair the damaged part and work on the aircraft will commence in Setember. So we will receive the aircraft sometime in November,” Mesfin said.

Tewolde was asked if they have lodged compensation claim for the cost Ethiopian incurred due to the problems of the Dreamliner. “Yes we have filed claims for compensation. It is under discussion. We have a long-time relationship with Boeing and it will be settled amicably.”

Tewolde declined to reveal the amount of the claim saying that it is confidential. “We are not legally authorised to disclose figures.”

As part of its 15-year growth blueprint dubbed Vision 2025, Ethiopian has been working on transforming the airline into an aviation group. The aviation group will comprise seven profit units — ET International, ET Domestic, ET Cargo, ET Catering, ET MRO, ET Aviation Academy and ET Ground Handling. The airline is in the third year of the Vision 2025 development strategy. Tewolde said that the airline is going well with the strategy which was labeled as too ambitious to achieve. “Some said it is too ambitious to achieve it but now we are proving that it is achievable.

According to Tewolde, the management will introduce the new organizational structure in September. The structure will have the seven business units. The seven profit units will be run separately as of this month. Under Vision 2025 the Ethiopian Aviation group will generate a revenue of 10 billion dollars by 2025.

Ethiopian is working to establish the third regional hub in Blantyre, Malawi, after it recently bought a 49 percent share on the newly-established Malawi Airlines Ltd. “The new airline is still in the process of formation. And I can generally say it will soon start operation.”

Ethiopian second hub was established in Lome, Togo, in 2010 after the airline bought a 45 percent stake on a private airline-ASKY. Tewolde said that ASKY is doing very well. “ASKY serves 22 destinations in West Africa; it carries 500,000 passengers and operates seven aircraft. It is doing according to the business plan. A new carrier does not make profit in the first couple of years of operation. ASKY has reached an even break and it will make a profit this year,” the CEO said.

The management of Ethiopian Airlines is planning to have multiple hubs in Africa. Currently, it is eyeing hubs in Central and East Africa. The Democratic Republic of Congo and Uganda are the candidates for the planned regional hubs.

Ethiopian is in the process of opening new routes to Los Angeles, Singapore, Ho Chi Minh City, Manila and Moscow. The airline is also to commence work on a new state-of-the-art cargo terminal and a four-star hotel at its hub in Addis Ababa. Tewolde said that his management is negotiating to secure loans for the projects. The airline is investing USD 50 million on its aviation academy expansion project. The aviation academy, which used to train 200 trainees annually, increased the number to 1000.

Ethiopian is 67 years young and it grew seven-fold in the last seven years. The airline is now the second biggest airline in Africa next to South African Airways. “In the past seven years we achieved more than what we did in 60 years,” Tewolde said.

Ethiopian serves 76 international (46 in Africa) and 17 domestic destinations. It has 60 aircraft with an average age of 7 years, the youngest fleet in Africa. The airline employs 7,300 full time workers. It has created 20,000 direct and indirect jobs.


By: Kaleyesus Bekele

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