Tuesday, May 30, 2023
BusinessDelayed US loan guarantee for Ethiopian Airlines on the horizon

Delayed US loan guarantee for Ethiopian Airlines on the horizon

Acquisition of 26 Boeing airplanes planned until 2025

Ethiopian Airlines is inching closer to secure guarantees from the Export-Import Bank of the United States (Ex-Im Bank) for the planned aircraft procurements from the US based aircraft manufacturing company, Boeing.

For its plan of acquiring up to 26 airplanes from Boeing until the end of 2025, Ethiopian has long been requesting the Ex-Im Bank for guarantee of loans, which was being delayed due to political influences from the US politicians.

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However, the Airlines is currently getting relief after the delayed processes of securing loan guarantees from the Bank is in the pipeline. Since last month, the Bank had begun permit processes and is about come up with a decision in the coming week, according to Mesfin Tassew, Chief Executive Officer (CEO) of Ethiopian.

“The decision was on hold for several months because of the war in the northern Ethiopia and pressure from the politicians,” Mesfin said. “For a month now, they were processing the permit and it is expected to be completed next week.”

The Bank provides guarantee when the Airlines acquires aircraft from Boeing and take loan from commercial banks for the acquisition, with lower interests. When buying an aircraft from US manufacturer, Ethiopian has always been using guarantees of the Bank, the US government wing established to promote the country’s export.

Among the 26 airplanes Ethiopian is planning to acquire from Boeing, 21 of them are passenger aircraft while five will be cargo aircraft. Currently operating with a fleet size of 140 aircraft, Ethiopian will receive a few more until the end of this Ethiopian fiscal year, including one from Boeing the coming May.

Opposing the proposed loan by the Bank, a US Congressman Brad Sherman was urging to further delay the loan in process reasoning the implementation of peace deal the federal government and Tigray People Liberation Front (TPLF) made beginning of November, 2022.

“I’m working with my colleagues on a letter to Ex-Im urging them to delay the action on this loan,” the Congressman wrote yesterday on his social media page. Brad’s writing doesn’t specify on what is left for the “full implementation of Ethiopia’s obligation.”

The loan Ethiopian will take could be from any of the several commercial banks competing to provide their credit under the backing of Ex-Im.

The CEO Mesfin said that once securing the guarantee and aircraft delivery time reaches, his company will choose the better interest offering bank. As per his explanation, the Airline usually goes to a potential creditor when it is left with a month of two to receive the aircraft.

“We will choose the one that could give us the better interests among many. We might take credit from several banks,” he said.

Selamawit Mengesha has contributed to this story.

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