► ETHIOPIA: A weaker Birr helps, but isn't enough as Ethiopian Airlines records 40% drop in profits.

After having posted "record revenues" in H1 of its 2011/2012 Financial Year, Ethiopian Airlines (ET) came tumbling back down to earth as it reported a 40% drop in annual profits for its recently ended 2011/2012 Financial Year.

The most surprising part of it all is, whilst the usual suspects for the drop were to blame - that is: high global oil prices and the Eurozone Crisis - Ethiopian voluntarily awarded wage increases of between 6 and 7% to its staff, in stark contrast to its southern rival, Kenya Airways (KQ), who has been forced to make redundancies, claiming high worker wages were partly to blame for its 57% drop in Q1 2012/2013 profits.

It should be noted that a weaker Ethiopian Birr (ETB) also helped to somewhat inflate profits for the 2010/2011 Financial Year which implies that things may not have been quite so rosy without it:

"“One of the contributing factors for the surge in profit in that fiscal year was the devaluation [of the Ethiopian Birr]. And it is unfair to compare the profit made in 2010/2011 to the 2011/2012 fiscal year,” the official said."

Source [CapitalEthiopia]

Ethiopian Airlines Profits 2008 - 2012 (Ethiopian Airlines)

Ethiopian Airlines Financial Year 2011/2012 Results Summarized:

- Figures For 2011/2012 (% Change on 2010/2011)

• Net Profit: USD$40.8million (-40%)
• Operating Profit: USD$55.70million (-)
• Operating Revenue:  USD$1.88billion (+37%)
• Operating Overheads & Costs: USD$320million (+35%)
• Number of Passengers Carried: 4.6million (+25%)
• Capacity Deployed: - (+22%)

Causes:

• High Global Oil Prices
• Devalued Ethiopian Birr
• Weaker Eurozone economy & economic stagnation in China and SE Asia

Source [The Reporter, Ethiopia]

Tewolde Gebremariam (JeuneAfrique)

Despite a third successive year of declining profits, Ethiopian has remained resolute and will forge ahead with its Vision 2025 plans which, CEO Tewolde Gebremariam outlined as being focused on BRICS countries, as well as building further hubs in Central and Southern Africa - something akin to its ASKY airline which operates fairly successfully out of its Lomé, Togo hub.

In order  to achieve this, Tewolde stated that Ethiopian would have to grow at a rate of 25 - 30% per year (looking at the figures above, operating revenue grew 37% on 2011). But, with oil prices sitting high and eating into everyone's profits, there may be cuts and belt tightening measures lurking just around the corner for Ethiopian as well..