Radar | Oct 05,2019
March 28 , 2020
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Ethiopian Airlines, which grounded 60pc of its international passenger fleet, is set to use all of its passenger planes for cargo shipments.
The airline came up with the new strategy as a coping mechanism in response to the latest business slowdown following the outbreak of Novel Coronavirus (COVID-19). The company decided to use all of its passenger fleets either with their seats using the traditional cabin loading or by taking out all the seats and loading cargo in the main cabin floor of the aircraft on top of the belly-hold capacity.
Despite the disruption of the passenger business, COVID-19 has caused a sudden and significant demand in global air cargo transport, according to Tewolde GebreMariam, Chief Executive Officer of the Ethiopian Airlines Group. The Airline lost 190 million dollars in revenues in February and March due to the flight disruptions after the outbreak of COVID-19 throughout the world.
"Hence, the air cargo business is booming, and it's operating at its peak capacity," he wrote in an email to all of the area managers, urging them to market the cargo business. "This gives us a new and unexpected business opportunity to expand our cargo business beyond the dedicated cargo airplanes."
Currently, the airline operates a fleet of 126 and is waiting for the delivery of 57 more aircraft. Out of the operating fleets, 12 of them are dedicated for cargo, according to its official website.
The management of the company came into the decision of diverting to the cargo business in full force after the outbreak of the virus struck the aviation industry. International Air Transport Association (IATA), a trade association for the world's airlines, estimates that industry passenger revenues could plummet 252 billion dollars or 44pc below 2019’s figure.
The combination of trip cancellations and country-specific restrictions on international flights cost the industry 880 billion dollars, according to the report from the World Economic Forum. Also, the countries' sharpest year-over-year drop was recorded on February 17, 2020, with a 71pc fall in flights compared to the same date in 2019, according to the report.
Most of the countries are in lockdown and closed their passageways and airspace. Passengers are not also travelling due to fear of the pandemic; while companies have closed factories, and most businesses have paused. Most of the international airlines companies have also suspended flights. American Airline, Delta, Turkish Airlines, Lufthansa and Emirates are among the airlines that have parked a significant number of their fleets.
Up to 113 billion dollars in revenue was lost by March 5, 2020, before the countries around the world introduced sweeping travel restrictions that largely eliminated the international air travel market, according to IATA.
Due to this downtime, many of the airlines are grounding their fleets and are seeking cash injections from their respective governments to overcome the crisis.
Airlines need 200 billion dollars in liquidity support simply to make it through, according to Alexandre de Juniac, the director-general and CEO of IATA.
"Without immediate government relief measures, there will not be an industry left standing," said Juniac. "Some governments have already stepped forward, but many more need to follow suit."
Ethiopian Airlines is the most affected, since it does not expect any government cash injection to survive, unlike all its competitors which expect massive cash bailouts and sovereign credit guarantees, according to Tewolde's note in the email.
Since the first cargo charter operation launched to Nairobi in 1946, Ethiopian Cargo & Logistics Services flies to 54 destinations in Africa, Europe, Asia and the Middle East with its freighter network. It has annual freight revenue of two billion dollars, with annual total tonnage of 820,000tn. The company earns a yearly profit of 200 million dollars.
As of the end of last week, Ethiopian Airlines, which earned an operating profit of 260 million dollars in 2019, suspended flights to 75 destinations. The number of closed routes have doubled within a week. All of its destinations in the Middle East are closed, while most of the destinations in the remaining continents are closed as least until April 15, 2020.
The airline, which expects 80pc of international passenger fleets to be grounded in the coming weeks, is currently flying to 35 destinations, which is only one-third of its usual number of destinations.
First reported on December 31, 2019, in China, the virus has since spread to over 192 countries and infected a little over 600,000 people. It has killed close to 28,000 people with a recovery rate of 23pc. So far, Ethiopia reported 16 confirmed COVID-19 cases, of which nine of them are Ethiopians, while the remaining are Japanese, Australian, Mauritanian and British.
Out of the total cases, 10 of them were confirmed in people who returned from overseas travel. In contrast, the remaining cases were reported from people who have acquired the virus locally after having contact with others who tested positive. So far Ethiopia has reported no deaths, but only one of the 16 people who acquired the virus has fully recovered.
PUBLISHED ON Mar 28,2020 [ VOL 20 , NO 1039]
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