Best Funding Solution Highly Commended: Ethiopian Airlines Group

Published: Jul 2019


Photo of Temesgen Getaye and Mesfin Demu, Ethiopian Airlines Group.

Temesgen Getaye

Group Treasurer


Ethiopian Airlines is the flag carrier of Ethiopia. During the past 73 years, it has become one of the continent’s leading carriers, unrivalled in Africa for efficiency and operational success, turning profits for almost every year of its existence. Ethiopian Airlines currently serves more than 120 international passenger and cargo destinations across five continents and 21 domestic destinations operating the youngest and most modern fleet in the industry.

Ethiopian Airlines closes first JOLCO finance deal in Africa

The challenge

The airline had a large number of aircraft on order with Boeing and Airbus and most of these aircraft had been assumed to be acquired on finance lease terms. Unfortunately, the traditional and less costly financing options were proving unavailable for the airline. European export credit agency (ECA) backed financing structures were not supporting Airbus, due to problems identified with the manufacturer. Furthermore, the Export-Import Bank of the United States (EXIM US) had not been operating at its full capacity since 2015.

As Temesgen Getaye, Group Treasurer, Ethiopian Airlines Group recalls, “It was therefore difficult to get economical financing structures for the airline although financiers from every angle are interested to work with Ethiopian.”

The solution

The EXIM is the official export credit agency of the United States. EXIM is an independent Executive Branch agency with a mission of supporting American jobs by facilitating the export of US goods and services.

An export credit agency is an institution that offers to finance for domestic companies’ international export operations and other activities. ECAs provide loans and insurance to companies to help eliminate the uncertainty of exporting to other countries.

Ethiopian Airlines decided to appoint Crédit Agricole as the lead arranger and opted for a Japanese Operating Lease with Call Option (JOLCO). Through this new source of funding, a first in Africa, the airline was able to close deals on its original delivery dates to deliver three new A350 aircrafts. As Getaye explains, “This arrangement allowed us to avoid the risk of the aircraft not being delivered and assured our operation to continue as per our long-range Vision 2025 road map. Additionally, we avoided the expensive commercial financing and leasing for our beloved airline.”

A JOLCO is an operating lease for the purpose of accounting and tax, which gives the lessee an option to purchase the aircraft at the end of the lease, or at some point during the lease period, at the purchase price determined at the commencement of the lease. Although it is an option, it is generally used in practice.

It’s the first time that the Japanese financing system, JOLCO, financed an aircraft deal with an African airline. JOLCO availed financing for our A350 aircraft and this deal shows the strong confidence of reputed global financiers in Ethiopian balance sheet and business plan.

Tewolde Gebremariam, CEO, Ethiopian Airlines Group

Best practice and innovation

This is the first JOLCO financing arrangement in the continent of Africa and the innovative nature is best measured by its cost effectiveness versus other forms of finance, flexibility and less risky alternative aircraft finance structures.

Key benefits

Qualitatively, the airline benefits from branding and promotion in the global financing world since JOLCO financing is assumed to be available only to premium airlines, hence opening new financing windows for the airline for future aircraft financing.

Quantitatively, the airline has benefited from obtaining very competitive, innovative and less costly financing than non-ECA supported financing and sale and leaseback financing. Moreover, such financing helps the airline from aircraft delivery risks and operational losses if delivery has been delayed. The financing costs of such JOLCO financing is at least 25% less than the other financing options available to the airline.

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