Ethiopian Airlines has expressed its dissatisfaction with certain component suppliers who have significantly increased the prices of their products, leading to the grounding of some aircraft.

Mesfin Tasew, the Group CEO, stated that the aviation industry has been affected by the rising market prices during the MRO Africa 2024 and African Aviation Training Conference and Exhibition, which were hosted by African Aviation Services Limited in partnership with Ethiopian Airlines Group at the Ethiopian Skylight Hotel this week.

Experts have also expressed their displeasure with suppliers who are taking advantage of the business trend and abusing their dominant position in the industry.

The Group CEO emphasized that the shortage of replacement parts in the aviation sector is putting significant strain on all airlines, including Ethiopian Airlines. “We have grounded a few of our aircraft due to issues with the supply chain.”

During a one-on-one meeting at the event hosted by Nick Fadugba, CEO of African Aviation Services Limited, Mesfin stated, “The problem we are facing today is that we don’t get spare parts when we need them. We want our suppliers to actively work on improving their supply chain and provide innovative solutions. When we order parts, we expect them to be shipped out as quickly as possible.”

Mesfin continued by explaining that due to the lack of equipment, some components that are sent to MROs are not fixed promptly.

He highlighted the significant increase in parts prices and expressed his dissatisfaction with suppliers who are charging inflated prices that do not align with the market.

As the CEO of one of the top MROs in the continent, servicing airlines in Africa and the Middle East, the Group CEO stated, “We believe that some suppliers are taking advantage of the parts shortage to unfairly increase prices.”

He further added, “The prices for certain parts have not just doubled, but in some cases, they have tripled compared to what we used to pay a year or two ago.”

Mesfin expressed his disappointment with the unethical business practices of a few suppliers, noting that not all suppliers behave in this manner.

He emphasized that given the current state of global inflation, price increases are expected, but the company expects fair prices.

Industry analysts, including Fadugba, share the Group CEO’s opinion that parts suppliers are exploiting their dominant position in the business and engaging in abusive practices.

“While the majority of suppliers, possibly up to 95 percent, support us in this situation, I can provide evidence that certain suppliers are charging us three times the recommended amount. Is this fair?” Mesfin complained during the continental MRO event.

In an interview with Capital a few weeks ago, the Group CEO mentioned that during the COVID pandemic, several companies that manufacture aircraft spare parts closed their facilities and laid off employees, making it more challenging to produce and supply the necessary spare parts to the industry.

“We are employing various strategies to manage this situation, including making special agreements with suppliers to receive preferential treatment. However, even after doing this, some of our aircraft remain grounded due to the parts shortage,” he added.

Ethio Telecom, the state-owned telecom provider, has recently announced the official launch of national digital ID registration in 29 cities, including Addis Ababa.

The plan is to distribute this digital ID to 90 million citizens nationwide by 2028. Ethio Telecom will register an average of 1 million citizens per month, making it accessible to 32 million citizens, which fulfills 36% of the national plan.

Frehiwot Tamru, CEO of Ethio Telecom, highlighted that the purpose of this initiative is to provide new products and services to citizens, enhance customer service, facilitate e-commerce transactions, promote job creation, offer small loans without collateral to increase financial inclusion, and improve credit transactions. He emphasized that this will also raise citizens’ credit scores and update their lifestyles through digital services, ultimately streamlining businesses.

During the official launch ceremony, Frehiwot Tamru pointed out that the service centers, franchise centers, and agents located throughout the country, along with the large data center, cloud service, and digital infrastructure that have been developed, will create an enabling environment for digital identification.

This program aims to benefit the undocumented sections of the community by providing them with access to the service through their respective providers, thus simplifying the tedious process.

A recent study by the Ethiopian Textile and Garment Manufacturers Association (ETGAMA) has disclosed that second-hand garments, locally known as ‘bonda’, now constitute 53% of the textile market in Ethiopia. This surge is largely attributed to the rampant illegal imports of these garments.

According to ETGAMA’s 2023 survey, the proliferation of second-hand clothing has become a significant market challenge for domestic textile producers. The survey highlighted that the appeal of bonda clothes among Ethiopians is due to their affordability and perceived higher quality, which are often sourced from well-known manufacturers in Europe and America.

These garments make their way into the Ethiopian market through various routes, including border towns such as Moyale and Dire Dawa, and surprisingly, through channels involving Ethiopian Airlines. The study noted that despite the existence of over 10,000 shops selling these garments legally, enforcement against the illegal import and sale remains lax, posing continuous hurdles for the local textile industry.

ETGAMA emphasized the economic implications of this issue, pointing out that Ethiopia is potentially losing approximately 2.5 billion birr annually in tax revenue due to these imports. The global second-hand clothing market, valued at $71.22 billion, is anticipated to quadruple by 2030, underscoring the growing scale of this challenge.

In response to the industry’s struggles, the Ethiopian government has outlined a 10-year plan aimed at bolstering the manufacturing sector. The plan includes ambitious targets to increase the share of domestic products from 30% to 60% and to enhance production capacity from 50% to 85%.

The association’s survey also shed light on various other challenges facing the textile industry, such as limited access to quality inputs, a scarcity of foreign currency, complex import-export procedures, and high logistics costs. These factors combine to create a challenging environment for local manufacturers, further exacerbated by the influx of cheap, second-hand clothing.

In a broader context, the manufacturing sector’s contribution to Ethiopia’s GDP stands at 6.8%, with exports accounting for 5.1% in 2021/22, as reported by the IMF. This compares modestly to neighboring countries like Kenya (14.2%) and Rwanda (11.1%), highlighting the need for intensified efforts to enhance Ethiopia’s industrial base.