12 August 2017

Ethiopia: Airports Enterprise Further Bound to Airline

The Enterprise is not allowed to transfer, promote and demote employees.

A new circular letter signed by the chief executive officer (CEO) of the newly established Ethiopian Airlines Group, Tewolde Gebremariam, has put restrictions on the management of the Ethiopian Airports Enterprise (EAE) over human resource issues, procurement, contract handling and legal matters.

The letter, whose purpose is ensuring smooth and effective integration, forbids the management of the Enterprise to pass major decisions, contracts and payments without the approval of the Group CEO or his delegate.

The new circular comes in the midst of a fear of monopoly and conflict of interest in the aviation industry.

"It is not clear what is going on in the aviation industry," said Dawit Gebregziabhre, partner of National Airways, a company engaged in the domestic flight operation service provision.

On the issue of human resources, the circular prohibits the Enterprise from transferring, promoting and demoting employees.

"Surprising and shocking," reacted one of the employees of the Enterprise. "Neither the Minister of Transport nor the Group CEO raised this issue during the discussion about the merger almost a month ago."

The new circular asserts that the Enterprise, whose employees are more than 1,700, is overstaffed considering its operation size. Hence, to prevent the risks of future overstaffing, the Group CEO, in the letter, suggested that reshuffling is needed to accommodate the senior staff.

Although Tewdros Dawit, the CEO of the Enterprise, agrees with the restructuring, he does not believe overstaffing is a concern.

"Hiring recruits is not appreciated before the realisation of the merger," he said. "But, there will be mechanisms to contain the permanent employees."

Also, to further avoid the overstaffing, the Group, in the circular, has also directed the Enterprise to terminate the contracts of employees in a probation period.

Furthermore, the new letter puts a limitation on the expenditures of the Enterprise. All expenditures over 150,000 Br must get prior approval of the Group CEO, the letter reads.

This seems to be unconvincing for some industry insiders who are part of the aviation industry.

"This is insignificantly small for an enterprise that manages billions of Birr of assets," said Dawit, who is one of the pioneers in the private aviation industry. "It is better to close the enterprise instead of making it out of the game."

Nevertheless, this is not concerning for Tewdros, who has been working at the Enterprise for over seven years.

"This is not going to have any adverse effects on the Enterprise since it is only applicable during the merger process," Tewdros said. "We expect that the amount will be revised after having a consultation with the Group."

Above all, the Group CEO also ordered the Enterprise to immediately transfer the pending legal cases to the corporate legal office.

The merger, which is said to be requested by the leadership at Ethiopian Airlines, gave the Group a mandate of providing airport services without discrimination including constructing, expanding, maintaining and managing airports, according to its establishment regulation.

Established with an authorised capital of 100 billion Br, the Group was formed after the approval of the regulation by the Council of Ministers.

Before the merger, a committee chaired by Sufian Ahmed, an adviser to the Prime Minister and Tewolde, made a feasibility study to draft the regulation.

Founded in 1945, Ethiopian Airlines claims to be sub-Saharan Africa's largest carrier with more than 95 international and 21 domestic destinations.

In 2014/15, Ethiopian Airlines earned a net profit of 3.5 billion Br, which makes it among the highest profit earning state-owned enterprises in the country. During the same period, the Airports Enterprise also netted a profit of over half a billion Birr.

One of the major goals of the merger of the two state-owned enterprises is also raising the efficiency of the airports and profit.


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