Ethiopian Airlines is expected to remain profitable with a focus on cargo during the pandemic

Cargo to push Ethiopia Airlines to profitability.

by The ExchangeJuly 20, 2021 in AfricaAviationEthiopiaFinanceTravel Reading Time: 3 mins read

Ethiopia’s national carrier Ethiopia Airlines will most likely remain profitable this year, despite the ongoing coronavirus pandemic that has brought airlines to their knees.

This is according to the ‘Economic Impact of the COVID-19 Pandemic on East African Economies: Volume 2’ report by Deloitte which says cargo will remain a strong business for the airline this year.

Ethiopian Airlines suffered a significant loss of about USD 1 billion in passenger flight revenue between January and June 2020 out of which USD 550 million loss occurred between January and April 2020, according to an earlier report.

The report reveals that the airline took advantage of its large fleet and destination networks to ferry cargo across the globe and converted 20 passenger aircraft to cargo planes during the onset of the pandemic.

Increased demand through June saw the airline double its cargo revenue and its cargo route expanded to 74 destinations.

“This diversification strategy allowed it to stay profitable without bailout money or borrowing, closing the past fiscal year ending July 2020 with an estimated profit of USD 260 million”, the report states.

Through this cargo diversification strategy, Ethiopian Airlines indicated that it had operated a total of 33,182 flights and transported 735, 869 tonnes of cargo between 25 March 2020 and 25 March 2021.

The airline won a gold award for being the leading airline in terms of cargo transported in and out of Guangdong Airport with 54.4m kilograms in 2020.

Deloitte attributes this to a strong partnership with China throughout the pandemic even as other airlines halted flights to China.

Also read: Ethiopian Airlines flight crew now fully vaccinated

Increased demand through June saw the airline double its cargo revenue and its cargo route expanded to 74 destinations /COURTESY

“The outlook for 2021 critically depends on the pace of the COVID-19 vaccine rollout. The acceleration of the vaccine rollout plans and easing of travel restrictions may lead to an increase of passenger flights in 2021 which has historically been the airline’s core revenue stream.”

The airline has gone digital in all of its operations to avoid physical contact and stem the spread of COVID-19 as part of boosting traveller confidence and convenience.

With the pandemic still ongoing, cargo remains a strong business for Ethiopian Airlines and is expected to remain profitable in 2021 on the backdrop of this

Overall Tourism sector

The reveals that the devastating impact of the COVID-19 pandemic coupled with heightened political risk in the country saw tourist arrivals and international receipts decline by an estimated 67.3 percent and 75.2 percent respectively to reach an estimated 266,000 arrivals and USD 1 billion respectively in 2020.

It further shows that hotel occupancy rates in the country reached a low of 2 percent leading to 88 percent of hotels in Addis Ababa either partially or fully halting operations as of May 2020.

Ethiopia’s hotel industry growth slowed down to 2.2 percent in 2020 compared to a growth of 9 percent in 2019, and estimates indicate that the industry suffered a monthly loss of USD 35 million in 2020 due to the COVID-19 pandemic.

The government introduced a five-year zero profit tax policy for new investments in the hospitality sector which is expected to encourage private sector investment.

According to the study, the development of world class tourism facilities is expected to lead to job creation and boost tourism earnings.

Data from the report adds that the country has upwards of 21 internationally branded hotels under development which are expected to add about 4,300 rooms to the market.

“It is however unlikely that all of these hotels will open given that business and leisure travel is yet to pick up as a result of travel restrictions still in effect due to the new COVID-19 strains being identified.”

A modest recovery of the sector is forecast in 2021 whereby international receipts and tourist arrivals are expected to increase to USD 1.6 billion and 369,000 arrivals respectively.

This will be driven by ongoing economic growth in key source markets as people have more disposable income and there is an increased demand for foreign travel due to the vaccine distribution.

“The ongoing political conflict will weigh heavily on the country’s 2021 outlook as tourists who are already wary of post-pandemic travel seek more stable destinations.”

The Exchange