Monday, August 18, 2014

Ethiopian Short-Haul Fleet Prepares for Takeoff

East African Carrier to Decide on Boeing and Airbus Acquisitions Next Week

 Ethiopian Airlines is poised to decide what aircraft it will buy from Boeing Co. BA -0.77% and Airbus Group EADSY +0.27% NV, as the African carrier seeks to add as many as 70 new jets to bolster efforts to build an East Africa aviation hub.
The carrier will make a decision by the end of next week on modernizing and expanding its short-haul fleet, Chief Executive Tewolde Gebremaria
m said. It will later commit to adding 20 more long-haul planes. The deals could have a combined list price of more than $11 billion, though airlines typically get large discounts.
The aircraft should boost expansion plans at one of Africa's biggest airlines. "A larger fleet is one of our pillars of growth," Mr. Gebremariam said in an interview.
Ethiopian Air operates Boeing's 787 Dreamliners and has bought but not taken delivery of a fleet of A350-900s from rival Airbus. It said that it is now looking to buy even larger twin-engine long-haul jets. The carrier is considering purchases of the Boeing 777X—launched last year at the Dubai air show—or the A350-1000 from Airbus, Mr. Gebremariam said. The deal would have a list price value of $8 billion, depending on the model chosen.

Airbus plans to deliver the A350-1000, the largest model of the new jetliner, from 2017. Boeing's 777X, an upgraded version of the largest twin-engine long-range jet with more efficient turbines, is due out a few years later. Airbus hasn't booked any A350-1000 orders so far this year, while Boeing has finalized contracts agreed to last year.
Mr. Gebremariam said the carrier may also acquire at least 17 more Dreamliners beyond the 13 on order. Ethiopian already operates nine of the jets. One of them suffered damage in July 2013 when an emergency transmitter caught fire while the plane was on the ground at Heathrow airport in London. Ethiopian also operates older 777 jets.
Even before making its long-haul fleet announcement, the Addis Ababa-based airline is looking to place its first order for a new-generation of single-aisle jets. The airline could buy 30 Boeing 737 Max planes—re-engined versions of the current jet—or the popular Airbus A320neo, for "new engine options," that also carry new turbines. The A320neo is due to enter service with airlines next year. The Boeing aircraft is set to be fielded in 2017.
Ethiopian operates Boeing 737s but none of the Airbus single-aisle planes.
Mr. Gebremariam said the deal will include 20 firm orders with options to take 10 more planes. The list price value of the transaction is about $3.4 billion.
Ethiopian aims to compete with the fast-growing airlines of the Persian Gulf region and Turkish Airlines, THYAO.IS +0.82% based in Istanbul, all of which have aggressively expanded in recent years into the nascent Africa aviation market.
"Our location is our competitive advantage so we plan to continue our fast growth, but it has to be profitable," Mr. Gebremariam said.
Government-owned Ethiopian is in the middle of an ambitious 15-year plan to fly 22 million passengers by 2025 on a fleet of 150 jets, achieving revenues of $10 billion. It made $120 million net profit on $2.5 billion revenues in the year ended June 30, Mr. Gebremariam said.
The airline flew 6.9 million passengers last year and expects growth of 15%-20% next year, similar levels to its Gulf peers—Dubai's Emirates Airline, Qatar Airways and Abu Dhabi's Etihad Airways.