ET Selling Eight Aircrafts Amid Stringent EU Regulations

Addis Fortune (Addis Ababa)

Samson Haileyesus

16 May 2011

Ethiopian Airlines (ET) announced this week that it is selling off five Fokker 50 and three of its decommissioned Boeing 757-200ER aircraft in a bid to expand the carrier’s revenues base as well as adhere to the stringent guidelines set by European regulators.

On April 20, 2011, 269 carriers from 23 countries (including 151 carriers from 15 African countries) were banned from European airspace by the European Union (EU), which cited air safety concerns for the decision.

Concerns over the safety of African carriers had been raised by the EU recently due to what it called frequent crashes and the use of older aircraft.

Since the airline made a deal with Bombardier, the Canadian aircraft manufacturer, in November 2008, to purchase eight Bombardier Q400 NextGen turboprop aircraft for 242 million dollars, ET has gradually been replacing the 54-seater Fokker 50s. Earlier this year, the airline announced that it was putting up the aircraft for sale and invited interested parties to initiate negotiations.

“The airline is already conducting direct negotiations with several domestic and foreign potential buyers to sell off these aircraft,” said Henok Tefera, an official at Ethiopian, following his presentation of ET’s nine-month report to Parliament’s Transport Affairs Standing Committee on Monday, May 9, 2011.

The sale was announced in the report, which indicated the airline registered a net profit of 1.2 billion Br over the past nine months. However, ET’s spending during the same period increased to 17.1 billion Br, 104.6pc more than the 16.4 billion Br the carrier had budgeted, according to the report.

The rise in expenditure was attributed by the airline to the spiralling global prices of oil, which took up 39pc (6.7 billion Br) of its total spending.

The expenditure on fuel had risen from last year’s in the same period by 67pc, contributing to the ET facing stiff competition from other airlines, particularly those from the Middle East, according to the report.

“The competition is not healthy, especially from the Middle East, as the carriers’ fuel are subsidised,” Henok told the committee. “This is the context in which we are operating.”

On the continent, the carrier’s expansion was affected by what Henok called protectionism, especially in Nigeria and Senegal.

Henok told the committee that the attitude ran counter to the African Union’s (AU) Yamoussoukro Decision, which calls for the liberalisation of the African air transport sector among African airlines.

Despite the competition, 2.75 million passengers, of which 2.4 million were international, were transported by the airline during the period, according to the report of the national carrier which reported operating revenues and profit of 1.1 billion dollars and 92 million dollars, respectively, in March 2010.

Ethiopian launched flights to new destinations that included Bangui, Central African Republic, and Maputo, Mozambique, over the past nine months. It also increased weekly flights to Washington DC, Rome, Hong Kong, Bangkok, Accra, Ghana, Juba South Sudan, and N’Djamena Chad.

In the same period, Ethiopian Airlines signed code sharing agreements with seven airlines: South African Airways (SAA), Air Mozambique, Air India, Air Nigeria, Rwanda Air, Scandinavian Airlines (SAS), and Air China.

The negotiations for the sale of the aircraft are ongoing and the public relations office of the airline expects a breakthrough in the discussions as early as this week, it disclosed to Fortune.

AllAfrica – All the Time