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Siphoning off the Ethiopian Airlines’ profit?

Posted on , Updated on by Elias Kifle

The Ethiopian Airlines CEO last Friday announced that the airline has made an annual profit of 129 million birr (see below). When that amount is converted to U.S. dollar, it amounts to only $14 million. EAL (referred to by some as the Purse of Ethiopia’s Dictators) is reported to be the largest and most profitable air carrier in Africa with annual passenger traffic of over 1.5 million. It has very few competators in Ethiopia and other countries. But the profit it is reporting is smaller than one SafeWay store in Washington DC. The Sheraton Hotel in Addis Ababa makes more profit than that. So the question arises, what is the real profit the airline made?

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Ethiopian Airlines Makes 129 Million Birr Profit
The Reporter (Addis Ababa), August 4, 2007

Ethiopian Airlines made a net profit of 129 million birr during the 2006/2007 budget year ending June 2007, it was learnt.

The management of Ethiopian disclosed the profit to its employees at a meeting held last Friday at the Addis Ababa Conference Center in Sidist Kilo. The chief executive officer, Girma Wake, said the company’s profit target for the 2006/2007 budget year was 307 million birr.

According to Girma, the main reasons for the lower profit than the amount forecast were increased rates on leased aircraft, escalating fuel price and cost increase on over-flying, navigation and ground handling charges.

During the 2005/2006 budget year, Ethiopian made a net profit of 134 million birr, a fall by 60 percent compared to that of the 2004/2005. The fuel price hike in the global oil market cost Ethiopian dearly. During the 2005/2006 fiscal year, the airline spent 1.86 billion birr (210 million dollars) on fuel, a sharp increase of 46 percent compared to that of 2004/2005. Girma said the escalating cost of fuel had slashed the company’s profitability.

However, Girma seems to be happy with the overall performance of the company. He commended the management and all the employees of Ethiopian for their “hard work and commitments” to the company. He said Ethiopian has won two international awards in the past one year.

The management decided to pay a half-month salary as bonus to all the employees. The management also made a six percent annual salary increment to all the employees, in accordance with the collective agreement signed with the Labor Union in March 2005.

Ethiopian has about 4,700 employees. The national flag carrier which started its service with a maiden flight to Cairo in 1946 with a DC 3 aircraft serves 50 destinations across the globe – 28 of them in Africa.

The company’s annual passenger traffic is over 1.5 million. At present Ethiopian owns 28 commercial aircraft. It is the first airline in Africa to order Boeing 787 Dreamliner aircraft. The first two of the ten B787 aircraft will come to Addis Ababa in 2008. Last month the airline signed an agreement with Boeing Capital Corporation for the purchase of one MD-11 freighter aircraft. Girma told the employees that despite the growing competition coming from foreign carriers Ethiopian has a bright future.

3 thoughts on “Siphoning off the Ethiopian Airlines’ profit?”

  1. 1.5 million passangers entering or transiting through Ethiopia, among which some are tourists. 4700 Ethiopians being employed at the EAL. Different companies and institutions providing services to EAL.
    Confrencees from all of Africa or other countries using EAL to come to Addis.Just to mention few. Put this question to a 4 grader and will tell you the significances of EAL to Ethiopia.

  2. EAL is a national institution and should be respected as such. Whether the profit is below what can be “reasonably estimated” is another question.

    There are some rumours about questionable procurement practices in the company. Maybe those rumours are true. Any responsible Ethiopian should be worried about that.

  3. The profit mainly due to Ethiopian standard salary, otherwise managining and operating such a huge corporation with the high cost of fuel is by itself outstanding achievement for a poor country.

    Compare Ethiopian with any other airline which has higher passenger traffics and show us the difference to justify your statement.

    Cheers

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