Ethiopian Airlines Cruises High Altitude while Parts Shortages, Price Surges Bite

Aug 9 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Ethiopian Airlines is facing an operational and financial balancing act, with its supply-chain bottlenecks now persisting for a fifth year since the pandemic. The shortage of aircraft spare parts has grounded roughly a quarter of its domestic fleet daily, along with two wide-body international aircraft, which constrains seat capacity and contributes to last year’s 28 million dollars domestic loss.

Slow global production and parts delivery from suppliers such as Rolls-Royce and Canadian manufacturers are industry-wide, but for a carrier with a dual mandate of public service and commercial viability, the impact is magnified.

Five aircraft from its 21-plane domestic fleet are grounded daily due to a lack of engine components. Two additional planes on international flights, including Boeing jets, have also been out of service for the same reason. One aircraft slated for delivery four months earlier arrived only recently because Airbus did not receive a required seat component on time.

Mesfin Tassew, CEO of the Ethiopian Airlines Group, projected that the situation will normalise by January 2026, but the interim is costly.

An electrical engineer by training, Mesfin became Group CEO in March 2022 and is set to retire next year after an extended term. He joined Ethiopian in 1984 as an associate engineer and later held senior maintenance and operational posts, including COO of Ethiopian Airlines and CEO of ASKY Airlines.

Spare parts prices have doubled, fuel expenses have surged by more than 50pc, and the Birr’s depreciation is eroding margins on domestic tickets priced in local currency. The Airline plans to expand its domestic network from 21 to 27 destinations, but passengers should expect fare hikes, as management signals a willingness to continue raising prices until a break-even point is reached.

“We'll readjust until we break even,” Mesfin said last week during a press briefing held at the Skylihgt Hotel, its subsidiary, on August 5, 2025.

Travellers say they are already feeling the strain.

"We'll readjust fares until we break even." Mesfin Tassew Chief Executive Officer Ethiopian Airlines Group

According to Abebaw Mebtu, 26, a native of Bahir Dar who now lives in Addis Abeba, a fare for his family’s trip jumped from 4,800 Br to 5,200 Br within minutes, and agents often charge an additional 50pc.

“I've to pay 2,000 Br extra and book one week prior through an agent,” he told Fortune.

The Group’s topline continued to grow last year, but profit dynamics softened. It reported 7.04 billion dollars in revenue for the 2022/23 operational year, up 14pc from the prior year. Operating profit rose by 12pc to 1.05 billion dollars, while net profit before tax slipped four percent to 860.3 million dollars. However, total expenditure increased by 15pc to 5.99 billion dollars due to expansion spending and higher operating costs.

Ethiopian’s Vision 2035 strategy centres on a major fleet build-out, more than 100 additional aircraft, including the Boeing 777X, which would make Ethiopian the first African carrier to acquire the model. Infrastructure plans include expanding Terminal I at Addis Abeba Bole International Airport and upgrading regional airports in Gode, Robe, Jinka, and Nekemte, alongside a feasibility study for a mega hub in Bishoftu (Debrec Zeit) town.

The Group is rolling out digital upgrades, including self-check-in kiosks, bag-drop systems, expanded digital payments, and cargo booking through Cargo.one. It has set sustainability targets to use five percent Sustainable Aviation Fuel by 2035 and to reach net-zero emissions by 2050.

Nonetheless, fuel price volatility looms over the strategy.

“Fuel cost volatility is one of the biggest risks,” said Satta Abreham, an independent analyst who published a three-year review of the Group.

He urged the carrier to lock in prices through hedging, restructure high-interest debt, and enforce faster payments from agents and partners.

“More aggressive hedging when prices were lower could have softened the recent spike,” he told Fortune.

Cargo remains a pillar, contributing 30pc of Group revenue, and management expects further growth. Chief Commercial Officer Lemma Yadecha cited cargo flows linked to the Belt & Road Initiative from China to Africa. Ethiopian operates 15 dedicated freighters and has invested 50 million dollars in e-commerce warehouses at Bole Airport. It is also expanding internationally, including with Air Congo in the DR Congo.

Ethiopian Aviation University trains more than 4,000 students annually and now offers degree programs through global partnerships. However, it remains dependent on Group profits, faces post-pandemic skill gaps, and still trails some regional peers in recognition. Liquidity is tightening across the Group. Operating cash fell 10pc, fuel costs surged 54pc to 132.45 billion Br from 85.85 billion Br. Debt servicing exceeded 51 billion Br, while rising receivables and inventory are straining resources.

The Skylight Hotel, which manages four lodges and two watercraft, posted a sharper turnaround, reaching its revenue of 53.4 million dollars, a 70pc increase from the previous year. Its pre-tax results swung from a 338,019 dollar loss two years ago to a nearly one million dollar gain. Net profit came to 636,471 dollars.

According to Mesfin, Birr-denominated revenue has risen, but depreciation has eroded its dollar value.

The Group’s annual report, however, flags inconsistencies within Skylight’s accounts. Segment reporting shows a 103pc increase in Birr revenue, but external hotel services revenue fell 47pc, revealing that intercompany bookings, such as crew accommodations, may be inflating the results. Costs have surged, too, with hotel costs of sales jumping by 146pc.

Satta urged management to simplify and refocus their efforts. He urged isolating hotel revenue, cutting costs, rebranding Skylight and restructuring debt.

“The group remains dependent on airline profits, faces post-COVID skill gaps from virtual training, and still lags behind regional competitors in global recognition,” said Satta. “I say Cargo is King! It's yet to see its potential. The cold chain line of pharmaceuticals from Miami is an indication.”

Satta also proposed monetising the training arm by offering certifications to other African carriers, securing AU education grants, and investing in VR/AR to support remote practical learning. He cautioned that opening training to outside airlines could dilute Ethiopian’s competitive edge unless the carrier expands ownership stakes in regional airlines to offset that risk. He argued that the domestic market barely moves the needle and delivers most value as a public service.

Recent demand spikes mainly reflect road travel risks due to insecurity. Leisure travel may soften, but essential trips face few substitutes. There are plans underway to make Addis Abeba Bole International Airport a destination for imports to African countries.

“That makes sense," Satta told Fortune. "If demand spikes, raising prices makes commercial sense, though it complicates the public service role. If fares rise in nominal terms, that’s a win, especially since they haven’t grown much in recent years.”

Fleet modernisation with A350s and B787s has improved efficiency; however, the Group does not publish key indicators, such as fuel consumption per Available Seat Kilometre, which limits transparency and external benchmarking. Satta argued that releasing efficiency data would build public confidence and enable comparisons with the global average of around 3.15L/ASK. He also called for route optimisation using analytics and broader Sustainable Aviation Fuel trials on high-visibility routes to position Ethiopian Airlines as a leader in sustainable aviation.

While he acknowledged strong performance under the government-appointed board of directors, Satta would want to see a more diversified board to strengthen long-term resilience.

PUBLISHED ON Aug 09,2025 [ VOL 26 , NO 1319]