Sunday, May 26, 2024
BusinessCOVID-19 costs Ethiopian USD 190 mln

COVID-19 costs Ethiopian USD 190 mln

– Suspends flights to multiple destinations  – Grounds more than 20 aircraft   – No job cuts – China supports Ethiopian

Africa’s largest carrier, Ethiopian Airlines, has lost USD 190 million revenue in just two months’ time due to the flight disruptions in connection with the COVID-19 outbreak throughout the world.  

In an exclusive interview with The Reporter Ethiopian Airlines Group CEO Tewolde Gebremariam said that Ethiopian has lost USD 190 million revenue in the month of February and March. “It is not a loss but we have lost that much revenue,” Tewolde said.

According to Tewolde, the airline lost the revenue due to flight disruptions to several destinations and the fall in demand for air travel in connection of the spread of the coronavirus. The airline has suspended flights to various destinations and reduced flight frequencies significantly.  Ethiopian suspended flights to Milan, Madrid, Marseille, and Geneva. The airline has decided to suspend some of the flights due to fall in travel demand while to other destinations because of complete lockdown.

Ethiopian stopped its operation to Milan as the Lombardy Region with a population of 16 million is on lockdown. “We are not flying to many countries as we used to. In extreme cases some countries have totally blocked their airspace,” Tewolde said.  Countries such as Djibouti, Equatorial Guinea, Congo Brazzaville, Sudan and Cameroon have completely blocked their air space.

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There are countries like Saudi Arabia and Nigeria which suspended flights from list of countries. South Africa, UAE, Qatar, India, and Thailand stopped issuing visa. The US and Europe have also imposed travel bans. This has a catastrophic impact on the global airline industry.   

“As a result Ethiopian Airlines has scaled down its operation by 25 percent. We have grounded more than 20 wide-body aircraft,” Tewolde said.

“This is unprecedented in the airline industry’s history in terms of the severity of the crisis. It is so severe that we are in a period by which we have not seen this level of crisis in the entire history of aviation. The next two to three months will witness unfortunately a lot of causalities in the airline industry.  It is really bad!” he added.

There are rumors circulating on social media claiming that Ethiopian Airlines is to lay off its employees. Some even went to the extent of saying the national carrier will collapse. Responding to these allegations Tewolde said it is utterly false. “This is fake news,” he added.   

Tewolde said his management has no plans to lay off its employees despite the heavy toll the pandemic is causing on the national carrier. However, the airline may reduce causal workers and outsourced services if the situation persists. Tewolde revealed that the pandemic is costing the airline dearly adding that the management has outlined a cost cutting program. “This is a very tough moment for us. But we have the experience of overcoming challenges in the past. This is an airline which traversed through civil wars, famine of 1984, pandemics like Ebola, SARS and ZIKA. So with the hard work and dedication of our employees and unity of purpose between the management and the staff Ethiopian will overcome the challenges.” Ethiopian Airlines has 14,000 permanent and 3000 contract workers. 

Today airlines have parked their airplanes. The travel demand is declining fast. People are not travelling mainly because of the fear and also some mandatory lockdowns by governments in Europe, US and other countries. Lufthansa has announced that it has parked 700 airplanes out of a fleet of 763. The US airline Delta has parked 600 aircraft while Emirates have parked more than 20 Airbus A380s in addition to B777s most airlines have parked 25-50 percent of their fleet. According to the International Air Transport Association (IATA), flight booking cancellation is as high as 75 percent. The sky is quite at the moment.

IATA initially predicted that the global airline industry would lose USD 113 billion but revised its forecast to USD 200 billion loss of revenue.  According to the global airline body, African airlines have lost USD 4.4 billion. Both IATA and the African Airlines Association (AFRAA) have called on governments to support their airlines.

In a statement, IATA said governments have the financial means to avoid an industry calamity in three ways: direct financial support for carriers to compensate for reduced revenues, and therefore support liquidity due to travel restrictions imposed as a result of COVID-19; loan guarantees and support for the corporate bond market by the Government or Central Bank, either directly to the airline or to commercial banks that may be reluctant to extend credit to airlines in the present situation in the absence of such a guarantee; and rebates and/or suspension on all employer imposed payroll taxes paid to date with an ongoing review for the rest of 2020, deferral or reduction in income taxes to date in 2020 and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other Government-imposed levies.

“There is no one-size fits all solution. So, we will be writing to governments around the world to alert them to the dire situation of the industry and get them moving—in the circumstances of their country,” Alexander de Juniac, director general and CEO of IATA, said.

“Time is of the essence. Governments cannot take a wait-and-see approach. We have seen how dramatically the situation has deteriorated globally in a very short time. They must act now and decisively,” Juniac added.

The African Airlines Association (AFRAA) urges African governments to consider the compensation of inevitable losses, the alleviation of exogenous operating costs, and the subsidization of the African airlines in a bid to assure the industry’s viability.

“Demand for air travel has been negatively affected by the COVID-19 outbreak, which has resulted in airlines making losses due to substantial schedule changes, travel restrictions and cancellations. AFRAA strongly recommends that African airlines engage their stakeholders to develop an all-inclusive proactive response strategy that addresses the adverse impact of the COVID-19 on their business to ensure airlines recover effectively to support key economic sectors” stated Abderahmane Berthé, AFRAA Secretary General.

Airlines are seeking governments’ assistance. The US has pledged 58 billion USD for American airlines while Boeing requested 60 billion USD to address liquidity challenges. European governments are discussing on the level of  support they should provide for their carriers.   

Ethiopian Airlines has not yet filed for compensations or any forms of subsidy. Tewolde said the airline has not requested assistance from the government. “Our government has many other priorities. If the calamities continue for a long time we may consider that but for the time being we have not sked for assistance,” he said.

The Chinese government has provided a largesse support to its carriers. “China is supporting not only its own airlines but also foreign airlines including Ethiopian Airlines which have been flying to China based on their level of operation. Both in kind and cash,” Tewolde said.   

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