2019 was a tough enough year for Ethiopian Airlines after it suffered the fatal crash of its 737 MAX and the loss of 157 lives. Sadly, 2020 has been equally as challenging for Africa’s biggest airline. In fact, Ethiopian Airlines has lost more than US$550 million since January due to the coronavirus pandemic. Will the carrier survive the current storm?
If we are to believe the carrier’s CEO, Tewolde Gebremariam, then the answer is ‘yes’. On April 7th, Gebremariam shared the bleak financials with reporters, revealing the $550 million in losses between January and March. However, he also said that he remains confident the airline will remain flying. This is in part, thanks to its cargo business.
Relying on cargo demand
According to Voice of America (VOA) News, the company has been softening the financial impact of COVID-19 by leaning on other streams of income. Speaking to reporters, Gebremariam said the following:
“We are now focusing on cargo. The cargo business is relatively doing well because urgently required medical supplies are needed all over the world from east to west, west to east, north, south and so on. We are also trying to convert some of our passenger aircraft to cargo,”
Indeed, cargo capacity is highly sought after right now. With a lot of air cargo normally flying with passenger flights, overall capacity is down. Therefore, with Ethiopian Airlines’ use of its cargo aircraft, along with the use of its passenger aircraft for cargo flights, the carrier can take advantage of the demand.
“It’s never going to generate as much revenue as the passenger flights. But it keeps the cash coming in and at the moment the rates for cargo are anything up to six times what they were three, four months ago because there is this scarcity and this urgency to move items quickly.” – John Grant, Analyst at OAG via VOA
Gebremariam adds that his airline has saved money by suspending many of its flights while also postponing discussions with manufacturers Boeing and Airbus regarding fleet modernization. Ethiopian Airlines has experienced an envious rate of growth in past years, and with that growth, the airline has been expanding its fleet and ordering the newest jets.
Other factors aiding survival
According to senior aviation analyst John Grant of OAG, Ethiopian’s management team has been making solid decisions leading up to this crisis:
“They have a more diverse network. They are using modern aircraft. They’ve got a good hub in Addis that feeds Europe to South Africa. It feeds West Africa to Asia and the Middle East. It feeds South Africa up to the United States and other points. Of all the African carriers, they are probably regarded and perceived as being the best in class.”
Indeed, as sub-Saharan Africa braces for the worst phases of this pandemic, the shipment of vital medical supplies and other equipment will be of utmost importance. The airline’s hub in Addis Ababa is well-positioned to connect much of “the western world” to sub-Saharan Africa – especially smaller African nations that may not typically see any kind of direct service from outside the continent.
The bottom line is that a major airline – especially one that is wholly government-owned like Ethiopian Airlines – should have no problem surviving this crisis. Whether we are talking about employees needing to be furloughed, or aircraft lease payments coming due, every group that is connected financially to Ethiopian should understand the temporary yet global nature of this pandemic.
Therefore, while some additional loans may need to be taken out, or certain payments deferred, it is really only a matter of time before Ethiopian is back at full-strength, dominating African aviation.
Do you think Ethiopian Airlines will successfully weather this storm? Let us know your thoughts in the comments.