Addis Fortune (Addis Ababa)
Wudineh Zenebe
24 November 2008
The Ethiopian Airlines (Ethiopian) last week secured finance from Export Development Canada (EDC) - Canada's export credit agency - for the purchase of eight aircrafts that will operate on local routes.
Ethiopian awarded the tender it floated for the procurement of the aircrafts to the Canadian Bombardier Aerospace and signed an agreement with them on November 14, 2008, for the purchase of eight Q400 NextGen turboprop airliners.
The fund for the purchase of these aircrafts was secured last Friday, November 21, 2008, after negotiations throughout the week, sources at the airline told Fortune.
The agreement signed with Bombardier also provides the option for the purchase of four additional aircrafts.
Based on the price list of the Q400 NextGen aircrafts, the total value of the firm order contract is approximately 242 million dollars and could increase to 366 million dollars if the option to purchase the additional four aircraft were to be exercised, according to a press release Ethiopian sent to Fortune.
The first delivery of the aircrafts is scheduled for September 2010.
Canada's EDC, which claims to offer innovative financing, insurance and risk managements solutions to help Canadian exporters and investors expand their international business, has agreed to give Ethiopian the required amount for both options.
EDC is the Canadian version of the Export and Import (Exim) banks of US and India, financial institutions that provide low interest loans to countries for projects to be undertaken by investors from the home countries of the financiers.
In a similar scheme, for example, the Indian Exim Bank financed the Tendaho Sugar Factory and plantation project, whose Engineering Procurement Contract the Ethiopian government awarded to the Indian Overseas Infrastructures Alliance (OIA).
There are, however, some who are surprised to see the airline's success in getting an international financier given that the global aviation industry is in crisis.
The International Air Transport Association (IATA) estimated a total loss of 5.2 billion dollars in the global aviation industry in 2008.
With the global loss expected to continue in 2009, people in the industry seem astonished by the agreement between Ethiopian and EDC.
"The financier has evaluated the airline, studied its profitability and approved the finance," Girma Wake, CEO of the Airlines told Fortune.
According to Ethiopian's press release, the Q400 NextGen turboprob aircraft has an excellent range and payload capability, which will permit Ethiopian the flexibility to deploy the equipment on its domestic routes within Ethiopia, as well as on its regional routes ranging up to 1,000 nautical miles or 1,850Km from Addis Abeba.
Another key factor for the selection of this aircraft is its exceptional performance in terms of climb rate, single-engine ceiling and higher level of take-off weight, resulting in increased payload from hot and high elevation airfields. The new aircraft has a passenger seat capacity of 78, in contrast to the 50-seater Fokker currently in use by the airline. Ethiopian also uses the Boeing, B737-700 aircraft for specific domestic flight operations as required.
Bombardier came out as the preferred suppliers, winning over other companies from Europe, Asia and Latin America.
The international tender Ethiopian floated for the purchase of aircrafts for domestic routes was finalized nearly a month ago, with two companies from among the contenders - the French ATR and Bombardier - being chosen as finalists.
Along with the Canadian aircraft manufacturer, the companies that had expressed interest in the tender were the Chinese CATIL International Holdings Ltd, the Brazilian Embroler, the French ATR, as well as the Japanese Sukhoi Super Jet and Mitsubishi.
Board of Directors of Ethiopian, chaired by Seyoum Mesfin, minister of Foreign Affairs, chose Bombardier's aircrafts as the best for the national carrier's domestic operations.
Bombardier Inc. is a global corporation headquartered in Canada. Its revenues for the fiscal year ended January 31, 2008 was 17.5 billion dollars and its shares are traded on the Toronto Stock Exchange (BDD).
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