Profits drop 40% at Ethiopian Airlines

Ethiopian’s profit plunges by 40 percent

The Reporter

August 11, 2012

The net profit of Ethiopian Airlines in the 2011/2012 fiscal year has tumbled by 40 percent to 732 million birr year-on-year. In the 2010/2011 fiscal year Ethiopian earned a net profit of 1.23 billion birr, which dropped by 500 million birr. In the 2011/2012 fiscal year, which ended on June 30, Ethiopian hauled 4.6 million passengers, a 25 percent surge in comparison to that of the previous year. The airline generated an operating revenue of 33.8 billion birr, up 37 percent. Operating expense increased by 35 percent to 5.7 billion birr. The airline made an operating profit of 1 billion birr and its net profit stood at 732 million birr.

Ethiopian said the unaudited figures for the fiscal year show that despite the challenges faced by the airline during the year, it finished the year in black with strong overall performance and is set to continue its growth to achieve goals set in its Vision 2025. At a press conference held yesterday Ethiopian CEO, Tewolde Gebremariam, said that the just ended fiscal year was the most challenging year.

“The fuel price hike was a daunting challenge. For the first time the price of fuel stayed high for a long time. It was above USD 120 per barrel for a year-and-half. The European economic crisis reduced the demand for air travel and the economic growth of China and other Asian countries stalled,” Tewolde told reporters at his office. “All these have affected the profitability of the global airline industry. As you have heard Kenya Airways has started laying off employees. And a number of major international airlines have registered loss. Despite all the challenges we are profitable. We made an annual salary increment of 6-8 percent.”

An official at Ethiopian told The Reporter that the 20 percent devaluation of the Ethiopian currency against the US dollar in September 2010 inflated the net profit the airline made in the 2010/2011 fiscal year. “One of the contributing factors for the surge in profit in that fiscal year was the devaluation. And it is unfair to compare the profit made in 2010/2011 to the 2011/2012 fiscal year,” the official said.

The airline introduced a six percent salary increment for employees earning a monthly salary of 4000 birr and above, seven percent for those who earn between 2000-4000 birr and six percent for those who earning 2000 birr and below.  At an annual internal meeting with employees held on Wednesday at the African Union Assembly Hall the management of Ethiopian management briefed them about the challenges the airline faced during the fiscal year.

It was a tough year for the global airline industry. Last March IATA forecast that the global airline industry would make a profit of USD 3 billion. However, IATA said African airlines would lose a total of USD 100 million. South Africa Airways, which is currently in the red, is receiving subsidy from the government. Royal Air Marroc, the national flag carrier of Morocco, which declared bankruptcy, is laying of employees.

Tewolde said Ethiopian is in the third year of the Vision 2025 (a 15-year development strategy) adding that the airline is growing according to schedule. “We are growing at an annual rate of 25-30 percent. We are on the right track,” the CEO said.

He added that the airline plans to build a new cargo terminal and maintenance hangar.

Ethiopian has set up a second hub in West Africa in Togo where its affiliate airline ASKY is based. ASKY was established by the private sector in 2007 and became operational in 2009. Tewolde said that ASKY, which is in its third year of operation, has managed to achieve a rapid growth.

The CEO disclosed his management’s plan to establish two regional hubs in southern and central Africa.  Under Vision 2025 Ethiopian anticipates to increase its fleet to 120 from the existing 47, the number of destination to 90, the volume of passengers to 80 million and its employees to 17,000.

Currently, the airline is expanding its aviation academy at a cost of 42 million dollars.