6 September 2017
The East African (Nairobi)
By Allan Olingo
Ethiopian Airlines almost doubled its profit for 2016, bouyed by an 18 per cent jump in passenger numbers.
The Ethiopian carrier summed up a great year for the continent’s largest and only profitable airline, with revenues of $261.9 million in 2016, from $150.9 million the previous year, despite the challenging operating environment caused by slower global economic growth and weaker performance of Africa’s major economies.
Its revenues increased by 8.6 per cent to $2.3 billion, a development attributed to an increase in flight frequency and opening up of new routes.
But the airline group chief executive officer Tewolde Gebremariam says that it was exposed to high currency fluctuations, leaving more than $220 million of its funds stuck in several African countries that had forex challenges.
Ethiopian booked a currency loss of $18.1 million as a result of continuous currency devaluation in many African countries and the associated problems of repatriation.
Mr Tewolde said the airline had difficulties repatriating funds in some oil-producing African countries.
“Repatriating funds held up in Nigeria, Egypt, Angola and Sudan as a result of the oil price declines was a problem. We have more than $220 million stuck in these countries. This has hit our liquidity,” Mr Gebremariam said.
Natural hedge
The airline was forced to resort to a natural hedge; making payments in the currency of sales and maintaining a higher cash reserve in the stable currencies such as US dollar, the euro and the British pound.
“Due to the fluctuation of most currencies against the US dollar, as well as critical shortages of forex in some of the major markers in Africa, we are closely working with International Air Transport Association (IATA) for possible ways of hedging of selected currency risks in major financial markets with selected banks,” Mr Gebremariam said.
Source- The East African