By Kaleyesus Bekele
The Ethiopian airlines is negotiating with prominent international banks to secure loans for the purchase of new jetliners, it was learnt. The 64-year-old national flag carrier has placed orders for the purchase of ten Boeing 787, ten 737, five 777, 12 Airbus A350 X WB and eight Q 400 Bombardier aircraft. So far it has received five of the Q400 turboprop regional aircraft.
While the global aviation industry is traversing a turbulent times, Ethiopian surprised everyone by putting scores of new aircraft worth billions of dollars on its order book. In 2005, the state-owned carrier became the second airline in the world to be placing ten B787 08 valued at 1.3 billion dollars. In the same year, Ethiopian signed an agreement with the US-based General Electric (GE) for the purchase of 20 GE engines that would power the Dreamliners with a total value of 300 million dollars.
Last year, Ethiopian signed a deal with the Canadian aircraft manufacturer, Bombardier, for the procurement of light 70 Seater Q 400 aircraft. It also made a firm order for five B77 aircraft valued at 1.3 billion dollars and 12A 350 X WB jetliners worth 2.9 billion dollars. The US-based Export-Import Bank (EXIM) recently granted credit guarantee for 1.5 billion dollars loan to finance the purchase of the Dreamliner and B77 aircraft as well as spare engines for the GE engines that would power the two aircraft types. EXIM is known for granting credit guarantee for the financing of American-made aircraft and engines.
The bank has been providing guarantees for Ethiopian in the past 30 years during which the airline acquired B 767, B 757 and 737 jetliners. Boing has dominated the Ethiopian jet fleet in the past three decades.
DVB and ING banks have signed agreements with Ethiopian to extend loans for the financing of the ten Dreamliners. Originally, the B787 aircraft delivery was scheduled for 2008-2010. However, due to the delay Boeing faced with the Dreamliner project, it failed to deliver the new jets to Ethiopia. The valid date of the loan agreements with DVB and ING had expired in the process. In the wake of the global credit crunch, ING completely halted financing the aviation industry while DVB asked Ethiopian for re-negotiation to finance the Dreamliners. Nevertheless, due to the uncertainties that had unfolded themselves the aftermath of the market meltdown, DVB came up with higher interest rates that shunned away from the management of Ethiopian.
The Reporter asked Girma Wake, the Ethiopian CEO, who would finance the purchase of the Dreamliners, the B777 and the A350 XWB aircraft. “Since Ethiopian is a very profitable airline it does not have a problem in securing financing. We received a credit guarantee from EXIM for the B787 and B777 aircraft purchase. Having EXIM’s guarantee, we will certainly secure loans from American and other international banks,” Girma said Giram told The Reporter that the management of Ethiopian was negotiating with several banks which he declined to name. “We will secure a loan guarantee from the European credit agency for the financing of the A350s purchase. Once we have that guarantee we will secure loans from the European banks. And we are confident that we would pay back all the loans according to schedule. We know that we will be profitable enough to service the loans with the new aircraft. The landing institutions know this very well,” Girma said.
The B777 aircraft will begin arriving in Addis Ababa next November while the deliveries of the B787 jettiners are slated for July next year. The A350 will be delivered to Ethiopian begining in 2017.
The profitability of Ethiopian and its commendable credit history enable it to secure credit guarantees and loans from international financial institutions. Besides, Ethiopia is one of the few countries in the world that signed the Capetown treaty that deals with aircraft purchase lease financing.
The profitability of Ethiopian has been increasing steadily in recent years. In the 2008/ 2009 fiscal year, the company registered a record high profit of 1.34 billion birr (127 million dollars), a whopping surge of 165 percent compared to that of the previous year. Last week, ATW, an international ovation magazine, reported that Ethiopian was the 16th most profitable airline in the world and first in Africa. The magazine placed Ethiopian among the 25 top world carriers.
Currently Ethiopian operates 43 aircraft comprising B 767, 757, 737, 747, MDLL, Fokker 50 and Q 400 aircraft. The airline drafted a 15-year strategic development plan that envisages, among other things, increasing its fleet to 120 by 2025. The airlines has over 60 international declinations – 39 of them are in Africa. The airline has 4,850 employees and anticipates to increase the number to 10,00 by 2025.