VZCZCXRO1503
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DE RUEHDS #1267/01 1330819
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R 120819Z MAY 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 0535
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 02 ADDIS ABABA 001267 
 
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DEPT PLEASE PASS TO USTDA ALUPO AND PMARIN 
 
SIPDIS 
 
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TAGS: ETRD EAIR ECON ET
 
SUBJECT: ETHIOPIAN AIRLINES DETAILS AMBITIOUS EXPANSION PLANS 
 
¶1. SUMMARY: In recent meetings, the management of Ethiopian Airlines 
detailed expansion plans both to their core business and into 
associated areas.  The airline's plans mesh well with the Government 
of Ethiopia's (GoE) poverty reduction efforts, but overexpansion or 
poor investments could risk Ethiopian's status as one of the premier 
airlines in Africa.  END SUMMARY. 
 
CARGO AND COLD STORAGE 
---------------------- 
 
¶2. As the GoE encourages export-oriented agriculture and 
manufacturing, Ethiopia's national carrier has responded by 
increasing cargo capacity.  The airline owns two Boeing 757s and has 
leased two Boeing 747s which are used exclusively for cargo, 
delivering up to 600 tons of fresh flowers per week to European 
markets along with other cargo.  Ethiopian has also examined loads 
on its passenger flights to Europe and the U.S. and found excess 
capacity that is being used now to export textiles and garments. 
With the anticipated December 2009 delivery of Africa's first Boeing 
787, Ethiopian plans to expand further its cargo processing and cold 
storage areas at Bole International Airport. 
 
¶3. The current cold storage facility was designed with one room for 
holding both meat and flowers/produce, which poses sanitary and 
phytosanitary issues.  To address this in the near term, the airline 
is treating meat as immediate air freight and loading it directly 
onto the planes.  The entire working area of 1,200 square meters is 
currently used for flower storage and processing.  Because 
floriculture is a boom industry, forecasts are that the current 
facility will be inadequate to meet needs in the near future.  The 
airline is consulting with Dutch and German companies on a re-design 
of the existing facility.  Additionally, Ethiopian would like to 
construct additional cold-storage and have sought preliminary advice 
from the same German and Dutch companies.  However, Ethiopian 
Airlines Chief Operating Officer Tewolde Gebremariam related to 
EconOff and visiting U.S. Trade and Development Agency (USTDA) 
Country Manager Andrea Lupo that the airline is very much interested 
in U.S. expertise in the design and equipment of the future 
facility, including a detailed feasibility study done by a U.S. firm 
if USTDA funding were available. 
 
CATERING 
--------- 
¶4. In partnership with Lufthansa, Ethiopian is upgrading and 
expanding its catering facilities.  Many airlines currently cater 
out of their European hubs for segments outbound from Addis (i.e. 
Lufthansa loads catering for its Addis-Frankfurt route in 
Frankfurt).  Ethiopian hopes that this upgrade will attract airlines 
to cater out of Addis.  There is competition in this area from a new 
facility built and operated by Ethiopian-Saudi tycoon Sheik Mohammed 
Al Amoudi.  Ethiopian COO Tewolde expressed skepticism on the 
ability of the Sheik to compete, stating that the 14,000 meals per 
day the facility will produce is far too much for the current or 
projected market at Bole.  Tewolde has confidence that Ethiopian's 
track record in other services (cargo, pilot training, etc.) and 
Lufthansa's reputation for catering will give them the edge in this 
competition. 
 
A FOUR STAR HOTEL 
----------------- 
¶5. The airline recently broke ground for construction of a four star 
hotel immediately outside of Bole Airport.  The hotel will have 300 
rooms and is estimated to cost $30 million to build.  When 
completed, the hotel should compete with the city's two existing 
four star hotels, the Sheraton and the Hilton, with the advantage of 
being conveniently located for transit passengers.  However, it is 
unclear whether the airline will contract with an established 
hotel-management company or attempt to run the hotel on its own. 
 
A SECOND HUB IN WEST AFRICA 
--------------------------- 
¶6. In addition to expanding its route network with 
recently-announced service to Riyadh and Kuwait and plans for other 
relations, the COO related plans to establish a second hub in West 
Africa to facilitate European-African travel as well as 
intra-African service.  Tewolde declined to reveal the eventual 
location of the hub, but press reports from 2007 indicate that Lome, 
Togo is a contender. 
 
¶7. COMMENT: Ethiopian Airlines has a proud history of good 
operations, safety and profitability.  Many of their expansion plans 
(cargo, second hub) fit well in their core business.  However, 
expansion into the hotel business and outsourced catering may be a 
stretch.  Ethiopian's profile should continue to rise with the 
addition of the Boeing 787 in late 2009.  Whether its expansion 
plans fly high or fall flat will depend on decisions regarding 
management as well as global factors including market demand for 
Ethiopian exports and fuel costs.  END COMMENT. 
 
 
ADDIS ABAB 00001267  002 OF 002 
 
 
YAMAMOTO