Ethiopian Ramps up Cargo Investment for African E-commerce Hub

• African largest airline is considering an order for about five Boeing Co. 777 freighters and may also take upcoming Airbus SE A350s.
• Ethiopian has announced plans to resume flights with Boeing’s 737 Max on Feb. 1, almost three years after a deadly crash outside Addis Ababa.
• Ethiopia Exports of live trees, plants, bulbs, roots, cut flowers was US$217.32 Million during 2020, according to the United Nations COMTRADE database

According to Bloomberg, Ethiopian Airlines Group is planning to ramp up investment in cargo services and infrastructure and is looking to become a logistics hub for Africa’s growing e-commerce market.

The continent’s largest airline is considering an order for about five Boeing Co. 777 freighters and may also take upcoming Airbus SE A350s, Chief Executive Officer Tewolde GebreMariam said in an interview. The carrier is also looking to expand its cargo operations in Addis Ababa and hire new people, he said.  

“We are building a new e-commerce warehouse in the cargo terminal, E-commerce is growing especially between China and Africa and we want to continue the leadership.”

While Ethiopian has long been a major operator in freight, the Covid-19 pandemic has elevated demand as stay-at-home rules triggered a boom in online retail. Carrying goods during the past two years helped many airlines stay afloat, as border closures hammered demand for air travel. 

China is a major investor in Africa and Safaricom Plc, Kenya’s biggest mobile operator, has a partnership with a unit of internet group Alibaba Group Holdings Ltd. to facilitate electronic payments.

Cargo now accounts for half of Ethiopian’s revenue, compared with about 15% before the coronavirus, Tewolde said. That figure may drop to 30% as passenger services recover, which he said is likely to accelerate when China opens up in the second half of 2022. 

“Cargo is the breadwinner, that’s how we remain profitable and cash positive,” Tewolde said. “The passenger side is still suffering. We are about 70% of pre-Covid capacity.”

Ethiopian is finalizing the creation of new airline in the Democratic Republic of Congo, and will own 49% of the company. It has similar partnerships with the governments of Zambia, Chad and Malawi. However, a previous plan to order narrow-body A220 planes that would have helped connect the continent has been shelved, Tewolde said, without giving a specific reason.

Max Returns 

The company has announced plans to resume flights with Boeing’s 737 Max on Feb. 1, almost three years after a deadly crash outside Addis Ababa led to a global grounding of the model. The U.S.’s FAA and several other regulators have re-certified the plane and “significant modifications were made,” Tewolde said. 

“Our pilots and engineers are fully satisfied”

Authorities in Ethiopia are yet to release a final report into the March 2019 crash that killed 157 people. 

“It is very clear the report may not reveal any new thing,” Tewolde said. “It is proved beyond reasonable doubt that the design of the airplane is the cause of the accident.”

Ethiopia’s burgeoning flower-growing industry

Ethiopia’s flower-growing industry is setting its sights on the U.S. in a bid to break the dominance of Latin American producers in supplying roses and other blooms to the world’s largest economy.

State-owned Ethiopian Airlines Enterprise is evaluating freighter flights through Miami — the main entry point for U.S. flower imports — Los Angeles or New York, regional manager Girum Abebe said in an interview. The company currently transports stems there only in the bellies of passenger jets.

Ethiopia has become a major force in global floriculture in the past two decades, exploiting a tropical high-altitude climate that provides year-round natural light combined with hot days and cold nights perfect for bringing plants into bloom. The conditions mirror those found in the Andes, where growers in Ecuador and Colombia currently dominate flower exports to the U.S.

Ethiopia Exports of live trees, plants, bulbs, roots, cut flowers was US$217.32 Million during 2020, according to the United Nations COMTRADE database on international trade. Ethiopia Exports of live trees, plants, bulbs, roots, cut flowers – data, historical chart and statistics – was last updated on January of 2022.

“Ten or 15 years ago Ethiopia was not exporting a single rose, but now we have earned our position in the world market,” Girum said. “North America has been the major importer of horticulture products from other parts of the world, so we want to have part of that.“

Ethiopian flower exports are currently focused on Europe, and have made the country Africa’s second-biggest producer after Kenya and fourth-equal worldwide, according to Rabobank research based on 2015 figures. About 80 percent of Ethiopian production is flown to the Netherlands, the center of the global flower trade, and re-exported from there.

“Most people don’t know it but the flower market is very much a global one,” Amsterdam-based Rabobank floriculture analyst Cindy van Rijswick said. “Ethiopia is doing so well because its labor costs are a bit cheaper than Kenya and if anything its climate is even better, producing bigger blooms.”

European flower sales have been flat in recent years, encouraging growers to look at opportunities for penetrating trans-Atlantic markets, she said.

The expansion of North American flights will require a revision of existing air-service treaties between Ethiopia and the U.S. and Canada, said Girum, who spoke in Buenos Aires and oversees his company’s Latin American business. The African Growth and Opportunity Act, aimed at fostering U.S. trade with the sub-Saharan region, has helped encourage flower exports on a limited basis and was extended for 10 years in 2015.

Ethiopia aims to boost foreign-exchange earnings from flowers and other plants to more than $1 billion a year from $280 million now, according to the Ethiopian Horticulture Producer Exporters Association.

In order to achieve that the government plans to release a further 6,100 hectares of land mostly dedicated to floriculture — almost four times the amount currently under cultivation — while opening up the market to foreign development, according to EHPEA executive director Tewodros Zewdie. Dutch, German, French and Kenyan groups, as well as local ones, are undertaking studies and so far there’s “committed interest” for 1,500 hectares, he said.

Flower growing has also attracted tax breaks and state-backed loans as it becomes more important to a country that generally lacks access to foreign-traded currency. The sector has faced security challenges over two years of sporadic anti-government protests, with up to a fifth of farms facing attacks, though with the ending of a state of emergency the situation has eased.

Ethiopian Airlines, Africa’s largest carrier, handles 90 percent of horticultural exports via Addis Ababa’s Bole International airport, where a new 150,000-square-meter cargo hub has capacity for 1 million metric tons of sensitive produce annually, including fresh flowers. The airline has a fleet of six Boeing 777F freighters and last month ordered four more at the Dubai Air Show worth $1.3 billion at list prices.

A new passenger route to Buenos Aires will operate five times weekly starting March 8, with aircraft flying via Sao Paulo. Ethiopian is also evaluating a further direct service to a Latin American destination, Girum said, while declining to comment further.