Ethiopian Admits to Pressure from Soaring Fuel Prices

Tewolde Gebremariam, CEO of Ethiopian Airlines
Tewolde Gebremariam, CEO of Ethiopian Airlines
Tewolde Gebremariam, CEO of Ethiopian Airlines
Tewolde Gebremariam, CEO of Ethiopian Airlines

Revenues increase by 50pc compared to an increase of 30pc in last year’s period. Abdi Tsegaye,  Addis Fortune

The management of Ethiopian Airlines acknowledged, last week, that the national carrier is under pressure due to a surge in the price of oil on the global market, which almost doubled its fuel expenditures over the past two quarters, compared to the same period last year. The Airline was subjected to an additional 4.1 billion Br for fuel during the first six months of 2011/12, it said in a press statement, which management issued early last week.

Nonetheless, this came amid a business environment where the national carrier has enhanced its revenues by half during the same period, compared to 30pc growth registered during the first two quarters of 2010/11, according to the press statement. The management described this increase as “remarkable growth that [has] surprised the aviation community.”

But, the surge in oil prices, which it characterised as “beyond its control,” has been a source of alarm, not only to the Airlines, “but also to all airlines across the world,” the press statement admitted.

“No less than six airlines were closed over the past six months,” the statement that the national carrier issued on March 22, 2012, said.

Indeed, the global aviation industry has been hit by the soaring price of oil in the international market, following the political uncertainties that Iran poses in its nuclear dispute with the United States, European Union, and Israel. This has thus compelled the International Air Transport Association (IATA), an industry lobby group, to revise its profit forecast for the global aviation industry and cut back projections by half a billion dollars to three billion dollars.

The IATA’s original projection was made with the consideration that oil prices would not jump to the 99 dollar a barrel mark in 2012, but prices have gone up to 120 dollars a barrel, averaging 115 dollars for the year, so far. This increase has escalated airlines’ operating costs by an average of 34pc, according to the IATA.

“If fuel prices were to soar to 150 dollars a barrel, some airlines could even go bankrupt,” Tony Tyler, chief of the IATA, warned last week.

Ethiopian is taking various measures to offset this increase through cutting costs and enhancing the efficiency of its operations, announced the Airlines’ management, last week.

“Employees are showing their commitment in giving up their break hours to work and participate in various cost cutting measures,” the statement read. “The Airlines has the tradition and the experience of overcoming similar challenges. With the hard work of its staff and wise leadership of the management, it, no doubt, will do so again.”

It was during such trying a period that the Maintenance, Repair, and Overhaul (MRO) Unit of the national carrier announced on Tuesday that it saved close to 600,000 dollars, which could be used in order to fit fuel saving blended winglets on its Boeing 767-300ER.

“At a time when the industry as a whole is feeling the brunt of persistent high fuel prices, the winglets will allow the Airline to make a substantial cost savings, through lower fuel consumption, which is highly critical,” Tewolde Gebremariam, CEO of Ethiopian, said.

The work that the Unit performed for the first time is expected to reduce fuel burn by up to five per cent and carbon dioxide by up to 5,000tn a year, another statement issued the same day said.