WHBM

Ethiopian Airlines to Buy Up to Ten Boeing 787 Dreamliners
Am I the only one not viewing this with total enthusiasm. Here's the 787, latest technology that the major airlines of the world have to try hard to justify, and here's one of the poorest nations in the world coerced into buying them.

It's in the same week that we are told by a meeting of international finance ministers that we have to write off huge amounts of third-world debt, the implication being the debt was borrowed to feed the starving populations. Well examples like this one show where the money actually goes. And I am involved in a charity that is working hard in Ethiopia to alleviate conditions, while the government there (Ethiopian Airlines is government-owned) just spends its scarce foreign exchange in directions like this, and it just ends up in Boeing's back pocket.

If Boeing had instead donated the Ethiopians one or more 767s as they run out of production that would surely be more meritorious.

prspad

Last year Boeing said that any new order from Ethiopian Airlines would be accompanied by an offset deal for two of its South African suppliers to establish subsidiaries in Ethiopia as a way to generate jobs and provide balance-of-trade income for the country. Since this was a key negotiation point, I assume that it was accomplished.

SEA_Tigger

Well the EU is forcing Thailand, hammered by the tsunami, to honor their existing commitments for the A380 or risk additional trade sanctions, so not like Europe is dealing from the moral high ground here, either. Thailand could certainly use those billions for internal relief and infrastructure repair. And if they don't take the A380, the threatened trade sanctions on their primary export - shrimp - would impact their economy a great deal more then the cost of the planes.

If indeed Ethiopia is getting some quid pro quo from Boeing for the deal, that is more then Thailand is getting from Airbus. And perhaps a more efficient fleet will improve business service to Ethiopia, helping expand their local economy.

And of course I don't see Airbus offering Ethiopia free A330s/A350s and A320s to replace their existing Boeing fleet... But I'm sure they'd have been more than happy to sell them some. Just looks like Boeing made the better offer.

graraps

Thailand isn't quite as poor as Ethiopia, and the tsunami was pretty much an one-off event as opposed to a problem that's been going on for decades, so your comparison is invalid to say the least.

OTOH, ET are a state-owned airline and seem to be trying really hard to become a high-standard, profitable longhaul operation so getting efficient planes may net a few dollars for the poverty-stricken people of Ethiopia.

My views on the issue remain mixed.

prspad

According to Reuters, South Africa, Analysts say That Ethiopian Airlines is one of Africa's few strong carriers, along with Kenya Airways, Air Mauritius, South African Airways, Royal Air Maroc and Tunisair. They are very well managed and committed to be a leader in African aviation as a way to grow the country in the International arena.

SEA_Tigger

Money is money.

WHBM is implying that Boeing is...wrong...to accept a deal from Ethiopian Airlines when that money could be used to alieve suffering currently going on in the country.

So why is Airbus not...wrong...in demanding a deal from Thailand when that money could be used to alieve suffering currently going on in the country? And is not...wrong...for France to threaten large and very punitive sanctions against one of Thailand's major exports if they don't accept the deal? I don't see the United States threatening Ethiopia with sanctions if they don't buy the 787. And it looks like Boeing is actually offering economic development and jobs for the deal.

Mind you, the US is hardly innocent, having used their influence with many countries (most recently, Israel in an attempt to continue to block El Al's desire to replace some of their Boeing fleet with Airbus planes and Korea, twisting their arms to get them to buy Boeing F-15K Eagle fighters instead of the Eurofighter Typhoon).

So neither the US nor Europe, Boeing nor Airbus, are operating out of some greater "moral high ground" then the other. All seek advantage for themselves. So I don't see any reason to castigate Boeing for the Ethiopia deal any more then I saw any reason to castigate Airbus for the Thailand issue when that was brought up here in FT Newstand.

richard

belongs in Newstand so I am moving it there. Thanks for posting

--richard, moderator

magexpect

I don't believe that a single one FTer is so gullible as to believe that Ethiopian is able to buy these planes or even the government of said country.

It would be interesting to find out who will really be paying. Oil industry? The US government? A syndicate of both and some anonymous investors?

prspad

This is an interesting subject, so I did a bit more research on it. Some facts are that the US, according to Official Development Assistance (ODA) information from the UN, is the single greatest contributor at almost $16 Billion (cash $$ only, not goods or services) in 2003 to poor countries. The top 10 receipients of US aid start with Egypt at $831 Million, then in graduating amounts, Russia, Iraq, Congo, Israel, Pakistan, Jordan, Columbia, Afganistan, then Ethiopia at 10th with $374 Million in 2003 aid.

All EU contries contributed a little over USD $7 Billion in 2003 with no African countries listed in the top 10 of their donations, although the Palistinian Admin. Areas received $176 M.

The UK alone contributed a bit over USD $6 Billion, but Ethiopia was not in their top 10 of recipients. France and Germany did not list Ethiopia as one of their aid receipients, in fact the only European country that gave a substantial portion of their total aid to Ethiopia was Italy. The top 4 receipients of Italian aid were Mozambique, Congo, Tanzania and Ethiopia.

nycden

How can someone comment about a deal they know nothing about, except that Ethopia is a poor nation. Perhaps finding more information and knowing the true state of the airline (i.e., profitability) would be beneficial rather than just making uninformed guesses.

ETStar

Tsk tsk tsk
While ET is government owned, you have to remember that ET is still a profit-making company that earns valuable hard currency that is well used in the country. Like any airline, ET pays for its purchases out of what it makes through the transportation of pax and cargo from many parts of the world. ET has been around for a long time and has always maintained a young and technologically advanced fleet (and an all-Boeing jet fleet I might add). ET has done so even during worse times that the country is experiencing, including but not limited to the 1984 famine that all western countries' people are well aware of. If you are indeed charity minded and wish for the best to the people of Ethiopia, then you should be happy with the developments and what these purchases will contribute to Ethiopia as a whole.

As for why would ET get a 787 instead of sticking to the 763s it currently uses, well, while they are great for its operations, they still limit the airline from opererating ultra-long flights like ADD-PEK and ADD-IAD without a stopover (flights to IAD make a tech stop at Rome, with no rights to pick/drop pax from either end). Additionally, the 787s projected fuel savings over existing aircraft make it even more attractive to the airline. Why should ET pay for the lease of relatively fuel-guzzling aircraft when it can get more out of a better product?

I am actually elated to see the fact that this order will be part of a deal with Boeing setting up a subsidiary in Ethiopia. This would definitely create some balance with the political pressure that I am sure the airline and the country get from the US to purchase only Boeing-made aircraft. Yes, the history between Boeing and ET goes way back, but when you have Airbus knocking at your door and offering a much lower prices, you don't simply shrug it off and decide to pay much higher for a comparable aircraft (I am still trying to find out about what really happened with that Airbus 340 ET leased from Airbus, trained pilots and FAs for, had it painted in its livery and went through flight tests and pooof, cancelled it and acquired a 763! The Airbus was to be used on the ADD-IAD run). Aid is aid, and the last time I checked ethics, aid was supposed to be given to help people out, not to get something in return. And don't tell me there is no pressure on ET to purchase Boeing aircraft: if US Senators and Congressmen publicly write to lawmakers in countries like Taiwan to go with Boeing and that their Airbus purchase would hurt the US etc etc, I am sure they also do it to Ethiopians.

magexpect, ET does pay for its purchases, and has always done so (the airline has had a modern jet fleet since the early 60s). I would like to point a certain event that occured back in 1996, once ET acquired four 763s from Boeing. The loan terms were based on very high interest rates with this (of course) American bank, which were too high for Ethiopian to work with, considering the political instability in the region (tensions with a neighboring country). So, in order to deal with the high interst issue, ET asked the bank to renegotiate the terms, which the bank refused. So ET went to the Ethiopian government and got a loan at a lower rate and paid off what it owed to the bank. Well, $*** hit the fan with the American Bank going to the US Treasury as it was no longer going to get the high rates it had expected etc. Anyways, as you can now imagine,

WHBM

Just for your information I have been writing on the commercial aspects of airlines for over 25 years now. I am well aware of Ethiopian Airlines' position among the world players, its long-established relationship with Boeing (going back to the days when Ethiopia was a more prosperous country), its role as a personal ego trip for a few Ethiopian high-ups, its somewhat strange route structure which it combines with low load factors, its low fares for its favoured groups, its lack of conventional published accounts, and the proportion of available Ethiopian foreign exchange it manages to absorb.

Hence my original question.

ETStar

WHBM,
Since you appear to know a lot about ET, why not elaborate on the items you listed, which include the low load factors, its route structure which you find strange, the ego trip of the Ethiopian high-ups and the lack of published accounts. And please, do list your references to back up your claims. Also, please tell us what would happen to ET and its share in the Ethiopian economy had it not spent on the acquisition of aircraft and amelioration of its services?