30 June 2018

Ethiopian Takes Off With New Engines

The engine procurement and maintenance deal is worth $917.5m

Ethiopian Airlines, the national carrier, has signed a 934.4 million dollars deal with two American companies for engine procurement and maintenance as well as Auxiliary Power Unit (APU) service contract.

Ethiopian made the deals with General Electric Global (GE) and Honeywell International Inc. It also received a training grant worth 21.2 million dollars from the U.S. Trade Development Agency (USTDA).

The agreement was signed on June 25, 2018, when the President's Advisory Council on Doing Business in Africa (PAC-DBIA), composed of 23 companies from the United States, visited Ethiopia last week led by Under Secretary of Commerce for International Trade, Gilbert Kaplan. The forum travelled in four African countries including Ethiopia, to inform their subsequent recommendations to President Donald Trump on how to strengthen bilateral trade and investment with these countries.

With the new deals, Ethiopian Airlines will procure twelve General Electric engines valued at 444 million dollars. GE was also contracted for a 10-year engine maintenance contract valued at 473.5 million dollars. Honeywell sealed two deals - a 10.2 million dollars contract for the Bole Airport expansion and 7.2 million dollars for Auxiliary Power Unit (APU) service contract.

Currently, the Airline is on an expansion project with 345-million dollars fully funded by China's EX-IM Bank. The expansion project is underway by China Communications Construction Company Limited (CCCC) and expected to increase the annual passenger handling capacity of the Airline to 22 million from the current seven million.

USTDA, with a partnership of Sabre Corporation, will provide an Airline Solutions Training Program Technical Assistance for 400 employees of Ethiopian Airlines. The 21.2 million dollars grant will also be used for financing the procurement of airline information technology solutions, consulting services and industry practices.

Ethiopian has a long-standing partnership with American Companies, according to Kaplan.

"Ethiopian Airlines is a great partner for the United States Department of Commerce and the business community," he said.

Boeing, an aircraft manufacturer who has supplied almost 75pc of the Airline's aircraft, is one of the companies which has a strong tie with Ethiopian. Ethiopian also procured engines from GE, its major engine supplier. Honeywell and Sabre Corporation, the two American technology companies, had previously delivered services to Ethiopian.

The Airline is also working on future ties with GE in a new dimension, according to Tewolde Geberemariam, CEO of Ethiopian Airlines, a 70 plus-year-old company that had generated 2.7 billion dollars in revenue, with a net profit of 233 million dollars last year.

"We are working with GE on capacity building that will enable us repair and maintain engines in our premises," said Tewolde.

Last year Ethiopian inked a seven-year contract agreement with the technology provider, Sabre Corporation, to upgrade the airline's booking system at a cost of 62.5 million dollars. Ethiopian has been working with Sabre since 2005, and it is a sole provider of passenger reservation system of the airline including check-ins and commercial activities.

"These partnerships and the new agreement show the strong presence of Americans in the Aviation industry," said Yonatan Menkir, CEO of AeroRead Aviation Media Group.

Ethiopian operates a fleet of 100 aircraft with less than five years of service and another 68 with longer service period, according to its latest factsheet released in June 2018. It flies to 58 cities and has over 100 international passenger and cargo destinations. It serves six million passengers a year with its 16,002 employees as of January 31, 2017.

The new agreement, according to aviation industry specialists, will push the debt of the company high. The company has already incurred massive debts.

The financial statement of the company shows that it owes 41.2 billion Br in long-term loans as of 2016. Recently, the EPRDE executive committee has decided to privatise state-owned enterprises, including Ethiopian Airlines partially. The executive committee mentioned the massive debt of the country as the main reason to privatise these companies.

Out of the total 24.7 billion dollars debt of the country, 43.9pc is contributed by state-owned enterprises, including Ethiopian Airlines.

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