Ethiopian rolls out rescue plan to stay afloat
- Cargo becomes lifesaving operation - Suspends new fleet acquisition plan
The management of Ethiopian Airlines has rolled out a new business strategy that helps it to withstand the adverse impacts of the COVID-19 which costs the airline USD 550 million in lost revenue.
In a press conference held on Tuesday Ethiopian Airlines Group CEO Tewolde Gebremariam revealed that his airline has faced a financial, operational and commercial crisis due to the overwhelming impacts of the COVID-19 outbreak.
The COVID-19 has caused a global economic crisis unprecedented in the history of mankind. The airline industry is the most affected due to the flight disruptions, lockdowns and business slow down. One third of the global population is on lockdown and more than 7000 airplanes are parked all over world. The International Air Transport Association (IATA) estimated that the global airline industry will lose collectively USD 252 billion and out of that African airline industry would lose 4.2 billion dollars and since Ethiopian is the largest airline in the continent it will have the lion’s share of that loss.
The flight disruptions is costing Ethiopian direly. According to Tewolde, the airline has scaled down its operation by 90 percent and currently operating with ten percent of its capacity. Out of the 120 young and modern fleet Ethiopian has parked 91 of them at the Addis Ababa Bole International Airport which caused congestion at the apron.
The airline which used to operate 350 daily flights is now flying only 14 domestic and less than ten daily international flights. According to Tewolde, the domestic air travel demand has fallen by 70 percent.
Ethiopian has 110 passenger and 17 cargo only destinations. The airline was compelled to close 91 international destinations and currently is flying only to 19 destinations.
This has dire financial consequences. Tewolde disclosed that the national flag carrier has lost a revenue of USD 550 million between January and April. “Ethiopian Airlines is in a serious financial, operational and commercial crisis but we are trying to handle the crisis,” Tewolde said.
Despite the heavy blow the state-owned airline sustained the management has not sought for government’s financial assistance. “Our government has so many other priority areas. So we did not ask for help. We are trying to manage the crisis by ourselves. The management and employees of the airline are working 24/7. We are struggling to manage the crisis by our own,” Tewolde said.
In a bid to curb the daunting impacts of the global crisis on Ethiopian Airlines, the management came up with a new business strategy that focuses on cargo operations and aircraft maintenance. “We are working on cost saving aggressively and at the same time we are focusing on other business lines such as cargo, aircraft and engine maintenance and our new business, hotel,” the CEO said.
Ethiopian is operating charter flight services that enabled it to repatriate stranded Americans, Canadians and Asians to their homeland. “We have repatriated American peace corps and other American citizens and Canadians from Africa to their homes and reunited them with their families. We have received inspiring compliments from various governments,” he said. The airline has also repatriated stranded passengers and crew on cruise ships from Miami, Florida to The Philippines.
As part of the rescue plan Ethiopian is boosting its cargo business. With ten B777s and two B737 freighters, 17 dedicated scheduled cargo flights and a state-of-the-art cargo terminal at its main hub at the Addis Ababa Bole International Airport with a capacity to handle 1.2 million tons of cargo per annum, Ethiopian Cargo and Logistics is the largest cargo operator in Africa.
“We are now focusing on cargo operation. Cargo business is relatively doing well because medical supplies are urgently required all over the world. So cargo airplanes are busy. We are also trying to convert some of our passenger plane to cargo. At the moment we have a cabin loading but gradually we are going to remove passenger seats and use them for cargo to make sure that we survive global economic crisis and emerge stronger,” Tewolde said.
Ethiopian Cargo has distributed the medical supplies donated by Jack Ma, chairman of Alibaba Group, to 51 African countries within six days. The airline has received complements and letter of appreciation from the African Union and a number of African heads of states.
According to Tewolde, Ethiopian has also operated cargo charter flights from China to the US, Europe and Africa delivering the much needed medical supplies. The airline received letters of appreciation from the governments of China, Portugal, Italy and Switzerland. Cargo contributes to 15 percent of the airline’s revenue.
The other area that Ethiopian is focusing on right now is aircraft maintenance. “We are focusing on aircraft and engine maintenance. Thank God we are doing well in that sector. Although it is very small portion of our revenue. Cargo is 15 percent of our revenue and maintenance is much less than that. 85 percent of our revenue comes from passengers. That is why we are highly affected.”
Ethiopian is also focusing on its new business venture, Ethiopian Skylight Hotel. “Our plan is to focus and refocus on those businesses, which are not affected by COVID19, and sustain the airline and pass this challenge,” Tewolde said.
The CEO explained in detail about the precautions the airline is taking to ensure the wellbeing of its employees and passengers while operating under this harsh environment. Briefings are given to the flight crew by certified health professionals regularly and adequate number of face masks and hand gloves are loaded on every flight.
Michael Yared, vice president for customer service, confirmed that it was mandatory for all the flight attendants to wear face masks and hand gloves during flights. “It is included in our safety procedure. They even wear it even after they disembarked from the airplanes on their way home or to their hotels,” Michael said.
According to Tewolde, the airline is disinfecting the passenger and cargo terminal, maintenance hangars, aviation academy and office buildings thrice daily in accordance with the WHO and the International Civil Aviation Organization (ICAO) guidelines.
Despite the safety effort three flight attendants have tested positive. “We know them and we are constantly talking to them and they are in good conditions,” the CEO said.
The CEO denied reports that claim that the management has laid off employees. “We have not laid off employees of the airline,” Tewolde said.
However, the CEO confirmed that the management has put half of the 17,000 employees on paid leave as it reduced 90 percent of its operation. “This would also help us maintain social distancing in our premise,” he said.
“We have no plans to lay off our employees,” he assured reporters. According to him, there is also no plan to lay off the foreign nationals working for the airline. The newly established Ethiopian Airlines Group Basic Trade Union has demanded that the management should lay off the foreign nationals instead of the local staff. “We hired them because we need their skills. Why would we sack them? If we are forced to lay off our employees then it would not be based on nationality,” Tewolde said.
He mentioned that the management took disciplinary measures on a few employees who failed to comply with the rules and regulations of the company. The airline has significant number of leased aircraft with a monthly lease payment of 30 million dollars. The airline has requested the lessors to postpone the payment period.
According to Tewolde, Ethiopian has been servicing its loan according to schedule. The airline has a loan amounting to two billion dollars used to finance aircraft purchase and infrastructure development projects. “We have been very profitable in the past years and we built a very strong balance sheet. So we have not so far requested for loan repayment reschedule,” he added.
Meseret Bitew, chief financial officer, confirmed that the airline has not defaulted on any loan payments. “We have a commendable credit history,” Meseret said.
Asked how long the airline can sustain without filing for bailout Tewolde said it was difficult to put a time line. “It is very difficult to answer that question now but our plan is to manage this crisis on our own. We have a management with proved, tested and tried experience in the past and we have a dedicated employees working together. Our plan is to sustain and pass this crisis on our own. But if it is prolonged beyond our imagination we will cross that bridge when we reach there.”
The current pandemic crisis has jeopardized new fleet acquisitions. Ethiopian was contemplating to order additional wide body aircraft. “We were evaluating the B787s and the Airbus A350s jetliners but that process is suspended now,” Tewolde said.