Ethiopian carrier rethinks 737 Max purchase, citing ‘stigma’

The tail of a Boeing Co. 737 Max 9. (Bloomberg picture)

Ethiopian Airlines Group is reconsidering its order for 25 additional 737 Max jetliners from Boeing Co., in part because of the “stigma’’ surrounding the aircraft involved in two fatal air disasters in five months – one of them an Ethiopian Airlines flight.

Tewolde GebreMariam, the state-owned carrier’s chief executive, spoke in an interview with Bloomberg News a day after Ethiopian officials released a preliminary report on the accident that killed 157 people last month shortly after take-off from Addis Ababa and concluded it suffered the same equipment failure as a Lion Air 737 that crashed off Indonesia in October.

“We may reach the decision: Look, we just had a very tragic accident a few weeks ago, and customers still have the accident in their mind. So it will be a hard sell for us to convince our customers,’’ he said.

Ethiopian won’t take delivery of its remaining 25 ordered 737 Max aircraft right now – or perhaps at all, Tewolde said. A decision on the 737 Max purchases will come after Boeing offers a software fix to a system implicated in both crashes and seeing what regulators and other airlines do, he said.

“Our situation is quite different from the others, because we are the victim,’’ Tewolde said in the interview at the airline’s headquarters in the Ethiopian capital Addis Ababa by Bole International Airport, one floor above a foyer where models of Boeing jets are on display. “You can imagine the stigma that will be attached with the airplane.”

He said the airline will need to convince pilots and customers before resuming use of the aircraft.

Ethiopian has ordered 30 of the 737 Max jets and taken delivery of five, including the jetliner that crashed soon after taking off from Addis Ababa, Tewolde said. The plane, Boeing’s best seller, is grounded worldwide.

In both flights, a system was active that can automatically force the aircraft’s nose down. Boeing has said it is devising a software fix to avert deadly plunges by the jet.

GebreMariam said the airline will listen to aviation regulators around the world, in addition to the US Federal Aviation Administration, as it considers resuming 737 Max flights.

“We are part of the global airline community, waiting for the fix, and waiting for the fix to be certified by FAA and also the other regulators” including those in Europe, China and Canada, GebreMariam said.

Ethiopian Airlines, founded more than half a century ago under former Emperor Haile Selassie, has expanded beyond its home market with a hub model that pulls in passengers from around the world to Addis Ababa and sends them onward to cities across sub-Saharan Africa.

Ethiopian operates 102 passenger aircraft, most of them various Boeing models, including 10 of the 737-700NG version, according to a summary provided by the carrier.

The strategy has made Ethiopian the continent’s biggest airline and its only consistently profitable one, a beacon of corporate free-thinking in a region where flag carriers are often government playthings. That’s despite being 100 percent owned by the Ethiopian state.

Several big Boeing customers have threatened to reconsider their 737 Max purchases in recent weeks, jeopardizing the US$600 billion-plus order book for the plane.

VietJet Aviation JSC, which doubled its order to about US$25 billion in February, said it will decide on its future plans once the cause of the tragedy has been found. Kenya Airways Plc is reviewing proposals to buy the Max and could switch to Airbus SE’s rival A320. Russia’s Utair Aviation PJSC is seeking guarantees before taking delivery of the first of 30 planes.

Also since the crash, Airbus SE secured a US$35 billion jet deal from China. If Ethiopian Airlines declines additional Max jets, it may instead seek another model, the 737 NG, Tewolde said. Sticking with the 737 line would save on training, maintenance and spare parts, he said.

Asked whether he envisioned purchases or leases, he said details would need to be worked out with Boeing.

“We will have to do it together,’’ Tewolde said. “It takes two to tango. So we are in a challenging time together on this issue. So we can only solve the problem together, as partners.’’

Travel Season

Tewolde said the airline may need more capacity by the busy summer travel season.

“How long can we wait? I think that’s a big question,’’ he said. “Hopefully it will be fast enough before the summer peak kicks in, otherwise we will be forced to look for alternatives.”

Tewolde described Ethiopian Airlines’ relationship with Chicago-based Boeing as “still very good’’ and “very cordial.’’

“This is a relationship that has passed the test of time for more than 60 years,’’ Tewolde said.

The airline took delivery of Boeing aircraft beginning in 1962, according to the carrier’s website.

The company in 2014 announced an order for 20 737 MAX 8s it said were worth more than US$2.1 billion at list prices. The deal included options and purchase rights for a further 15 737 MAX 8s, the airline said. It said the order was the largest single Boeing order by number of airplanes from an African carrier.