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Ethiopian Airlines and PIA: A tale of two Third World state-owned entities

Ethiopian Airlines and PIA: A tale of two Third World state-owned entities

Pakistan

The largest airline in Africa has 140 aircraft with $6.1bn earnings in latest financial year

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LAHORE/NAIROBI (Web Desk/Reuters) – In complete contrast to what we have been witnessing as far as the affairs of Pakistan International Airlines (PIA) are concerned, Reuters reported that Ethiopian Airlines will start manufacturing aircraft parts in a venture with Boeing at an initial cost of $15 million, the government's investment agency said on Friday. 

The state-owned carrier, which is the biggest in Africa, has already signed the deal that also involves the local state Industrial Parks Development Corporation, the Ethiopian Investment Commission said on X, formerly known as Twitter.

The airline, which has a fleet of 140 aircraft, said in June that its earnings rose by a fifth to $6.1bn in its latest financial year.

On the other hand, former minister for aviation Khawaja Saad Rafique had warned earlier this month that the PIA – also a state owned entity just like the Ethiopian Airlines – might suffer alarming losses of Rs259b by the year 2030 if urgent corrective measures were not taken, which included the transfer of its administrative control to the private sector, as the airline had a debt burden of Rs742bn.

Coming back to Ethiopia’s state-owned airline, the commission said the venture will make "aerospace parts, including aircraft thermo-acoustic insulation blankets, electrical wire harnesses, and other parts."

"The investment project is expected to create employment opportunities for more than 300 Ethiopians," it said.

The commission did not say when production will begin. There was no immediate comment from Boeing.

Other African carriers like Kenya Airways have said that a shortage of parts, caused by the Ukraine war crisis which cut supply of Russian titanium that is an important component of global aviation, has led to flight disruptions.

It was not immediately clear if Ethiopian Airlines has also suffered from similar lack of parts. 

PIA PRIVATISATION 

Privatisation of national flag carrier has always been a controversial subject as multiple efforts couldn’t leave the drawing board stage amid a strong resistance.

However, the coalition government before completing its tenure appointed retired Air Vice Marshal Muhammad Amir Hayat as CEO for one year and announced a plan to privatise the loss-making PIA.

Read more: PIA appoints new CEO as it braces for privatisation

The move is in line with the International Monetary Fund (IMF) deal which has prescribed tough conditions to reduce state expenditure and thus making the plan more practical than ever in Pakistan’s history.

Hayat had been the acting CEO since April 2022, after the former chief executive’s retirement.

Meanwhile, the Ethiopian Airlines’ success story does raise a serious question: If a state-owned enterprise in another Third World country is reaching new horizons then why the PIA – once respected around the globe – is a complete disaster?

THE LUFTHANSA STORY

Germany too once had its state-owned airline and it was none other than Deutsche Lufthansa AG but even the highly developed European nation couldn’t afford it.

In early 1994, the German government announced that it would make Lufthansa a private company, disclosing plans to cut its 51.4 percent ownership to a minority position.

Earlier, the government reduced its stake in Lufthansa in 1987 and 1989 by a total of 25 percentage points by not participating in two capital increases.

It also introduced a broad restructuring program, cutting staff by 7,500, to 40,500, by the end of the year-end and revamping its business divisions – a process that was completed in 1997.
 

 




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