After two years of talking about deregulation, Ethiopia’s government has again put the subject back on the agenda.
The Ethiopian government wants to speed up airline deregulation, a process it started in 2020. Despite already ratifying regulations that allowed for joint investment by foreign and local investors, the reforms of 2020 have yet to be implemented.
Yesterday, Ethiopian news outlet The Reporter said it had seen a document that planned to end protection over the domestic aviation sector and allow foreign investors to participate. The document quoted is the second Homegrown Economic Reform (HGER 2.0), which will be in place for the next three years before being superseded by HGER 3. According to The Reporter, the document says that “the domestic aviation sector will be liberalized to improve efficiency and access.”
Joint ventures not proving popular
The domestic market, dominated by state-owned flag carrier Ethiopian Airlines, has been closed to foreign investment. However, in 2020 new regulations were drafted that allowed for joint investment by foreign and local investors, but implementation has not occurred. Director General of the Ethiopian Civil Aviation Authority (ECAA) Getachew Mengiste said:
“The investment code already allowed a joint venture for local aviators to hold the majority stake in the partnership. But it is not implemented because further directives are needed to implement the investment code. In the past, there were no interested foreign investors, but that has changed now.
“But we have to do a lot to promote the new laws and attract foreign investors into the domestic aviation sector. Most of the foreign aviation investors are requesting incentive packages, and we will solve it with the Ethiopian Investment Commission.”
Ethiopian Airlines dominates the local scene
Photo: Wirestock Creators I Shutterstock.com.
Ethiopian Airlines is the largest airline in Africa, with fleet data from ch-aviation.com showing it has a total fleet of 130 aircraft, with 21 dedicated to freight operations. The airline’s single-aisle capacity is a mix of Boeing and De Havilland Dash-8 aircraft, including Boeing 737-700s, 737-800s, 737 MAX 8s and 767-300ERs, supplemented by DHC-8-Q400s. The widebody fleet is a mix of Airbus A350-900s and Boeing 777-200/300ERs, 787-8s and 787-9s.
Reforming the aviation sector was also on the mind of the previous ECAA Director General, Wossenyeleh Hunegnaw. In 2020 he told Times Aerospace that the government intended to open the air transport sector for investors, including lifting the 50-seat limitation imposed on private airlines. He added that private airlines would be encouraged to operate scheduled flights and that foreign nationals and companies could invest in local private airlines. However, those regulations stipulated that Ethiopian nationals should own the controlling stake.
Going back to yesterday’s report, Mengiste said that interested foreign investors are currently approaching the ECAA and are in the process of investing in the local aviation industry. He also pointed out they are asking for loans, using their aircraft as collateral. He added that foreign investors also want tax holidays and airport access as part of incentive packages to invest in Ethiopia’s aviation sector.
Currently, 13 private local aviation operators are licensed by the ECAA and operating in the sector. According to Mengiste, three new aviators have acquired licenses in the last year, but “no foreign investor asked to enter under the 49/51 equity ratio allowed under the investment code.”
Do you think Ethiopia will be able to attract foreign aviation investors? Let us know in the comments.
Sources: The Reporter, Times Aerospace