Eritrean Airlines Acquired A Second B767 Aircraft

 

Last year, on Sunday, June 27, 2003, in an article “Let’s Patronize Our Own National Airlines” to Asmarino.com, we expressed the following words, “The acquisition of the B757 (narrow-body 185-seater) or another B767 (wide-body 217-seater) is intrinsically related to the success of the wide-body already in place.”  A year later, today, Sunday, June 27, 2004 at 1:30 AM, the Eritrean people celebrated the arrival of a Wide-body jet B767-200ER (with passenger configuration of 205 seats) at Asmara International Airport (ASM).  Congratulation!  Your patronage has secured our national airlines for years to come.  The addition of the second aircraft to the fleet signifies that Eritrean Airlines has survived the first difficult year for any start up business organization and will continue to provide better services to the traveling public and the nation at large. 

 

 On Friday June 25, 2004, at 9:00 PM (EST), Eritrean Airlines rolled out its second airplane B767 from Miami Tech line maintenance facility to runway 9L at Miami International Airport (MIA) for a 16-hour flight to Asmara, Eritrea (in Northeast Africa).

 

Eritreans residing in Miami gathered at Miami Tech to watch their airplane pushed back from the maintenance facility to the taxiway.  About one hundred feet before the entrance to the taxiway, the captain powered the engines in the direction of the runway where all of us could see the entire aircraft charging for take off.  It was a historic sight and emotional moment for any concerned Eritrean.  Mr. Fessehaie Beimnet owner and operator of Juliana Enterprises was standing next to me and said, “This is the happiest moment of my life, I have never been close to such a wide-body aircraft that belongs to us.  I don’t know what I own in this aircraft, but I have a strong attachment with this aircraft and I feel it’s mine.”  As soon as Fessehaie said that, the aircraft entered runway 9L and started the run up for the final departure.  It passed roaring our sight.  I was taken by the majestic beauty of the aircraft and expressed  “Jet non pareil” (nothing like this jet, in French) in memory of my late professor Petros Hagos (University of Asmara 1972).  It is these and similar memories that connect Eritreans in diasporas to our national airline.  Eritrean Airlines believed in its ethnic market and successfully provided competitive services with only one aircraft for a year and made it well.  Hats off to the traveling public, without their patronage the second aircraft would not have materialized. 

 

Captain Asress Araia, Chief Executive Officer of Eritrean Airlines (ERT) and Mr. Yemane Fessehazion co-pilot, commanded the flight.  As expected, it arrived on 1:30 AM (Asmara time) and was welcomed by about 200 people at ASM.  Eritrean Airline management and staff prepared a cocktail party in the terminal building for its pilots and Additional technical people on board the flight: Mr. Fesseha and Mr. Teklai (Maintenance and Engineering), Mr. Bereket (Quality Control), Mr.Gebremedhen and Mr. Negussie (Civil Aviation Authority of Eritrea).  All of these technical people were in the United States since May 13, 2004 to inspect the aircraft, review maintenance records, purchased necessary tools and parts for the maintenance shop.

 

At 3:00 AM, I had the honor to talk to Captain Asress at his residence.  During our telephone conversation, he said that the flight was a great success and the aircraft performed very well.  In his own words, “every thing on this aircraft works well.”  He seems to be very happy with the aircraft and expects it to be the workhorse of the fleet.  At one point he described it as a flexible machine that will out perform the competition. 

 

In line with the captain’s description, this airplane reminds me about the “virgin bee” in the honeybee colony.  As we all know in an average size honeybee colony, there are about 60,000 bees, of which the majority are females (known as the worker bees).  Of the total number, the mail population (the drones) is only few hundreds.  The queen bee is much larger than the drones and workers and it is the mother for all of them.  In the bee colony, every one has a specific task and they perform their jobs effectively.  The female workers perform most of the required tasks.  The drones have only one purpose in life that is to mate with the queen in order to produce eggs.  The queen lays eggs at a rate of about 1,000 per day.  Of the thousands of eggs, some are slightly larger than the rest.  When these larger eggs emerge from their cells, they eat honey and groom themselves for some time, then proceed to look for rivals of equal size and mortal combat eliminates all of them except one.  The survivor is the virgin bee.  In about a week, the survivor flies out to mate with the drone (s) in the air and the mated queen returns to the hive as the new queen mother and life continues the same way in a new hive and under new leadership. 

 

Since, the first B767 was named the “Queen Bee” for specific purpose, I thought naming the second B767 the “Virgin Bee” (“gorzo nhbi”) fits the same philosophy.  I believe this will allow continuity in the bee colony by naming the forthcoming B737-300 as “Busy Bee” (“nTuf nhbi”) due to its function that covers short routes in the neighboring markets. 

 

I am sure many compatriots are pleased with the new addition of the “Virgin Bee” to the colony.  We also expect some concerned nationals to ask questions regarding the status of the aircraft.  As in the past, Eritreans want to know if the aircraft is leased or purchased, new or used, cost price and name of the previous operator.

 

There will be official releases to address the above-indicated issues, but any concerned person can research for these answers in the US registry and the Federal Aviation Administration records for details.  Just to inform some concerned nationals who have no access to the Internet, please allow me to share with you some of the available information on record.

The “Virgin Bee” is a used aircraft with outstanding maintenance records.  It was owned and operated by a world-class major airline known for its top quality maintenance in the world.  The “Virgin Bee” is purchased and paid in full (what a feeling!).  According to the Purchase Agreement document, Eritrean Airline is the buyer and the signatory is the Chief Executive Officer of Eritrean Airlines.  However, the seller of the aircraft has four more airplanes of the same on the market and Eritrean Airlines has agreed not to officially announce the purchase price until the other airplanes are sold.  This implies that the selling price was so low that it would affect the price of the other airplanes negotiated in June or thereafter.

Just to get an idea about the current market value of the same aircraft, some published prices are indicated below for reference, that way no one will be misinformed like last year. 

Table 1

Aircraft Value B767-200ER HGW as of October 31, 2003

Year

Low

Mid

High

1984

 $       9.5

 $              12.6

 $       14.1

1986

11.0

14.7

16.4

1988

12.5

16.7

18.8

1990

14.1

18.8

21.1

1992

15.6

20.9

23.4

                          Source: Aircraft Value News, January 12, 2004


 As in the past, there will be some critics who would argue why does Eritrean Airline has to buy the airplane at this time?  How does one justify spending on an airplane when there are other critical national issues?…etc.  We will receive and discuss constructive criticisms as they come, but as a general response, the charts below speak louder than thousand words.  In our study we observed that aircraft price was at its lowest in 32 years and it is already on the rise.

Source: Aircraft Investor (Sigma)

Source: Aircraft Investor (Sigma)

 At present, most aircraft investors owe the banks money on aircraft more than its market value.  In other words, the actual book value is significantly higher than the market value.  In such situation, owners are not willing to sell at lose unless forced by hard times.  Consequently, aircraft owners would like to lease aircraft now for better resale value in a year or two.  Naturally, a smart buyer would purchase when the aircraft value is depressed.  Eritrean Airlines’ move to purchase the aircraft was driven by low aircraft price and outstanding maintenance status of the aircraft.

 

Aircraft transaction is a long and tedious process.  It takes at least six months to move (sell/lease) an aircraft.  Eritrean Airlines started the action in November 2003 when 63 B767 aircraft were available on the world market for sale/lease.  This represents about 8% of the B767 fleet in the world.  According to industry experts   “A level of 3% is considered desirable for equilibrium between supply and demand to exist.”  The variance of 5% (8%-3%) indicates surplus aircraft in the market, which was driving prices of B767s down.  In June 2004, availability went down to 29 aircraft or less than 4% of the fleet, which is close to equilibrium.  It is imperative from the supply bar chart below that aircraft negotiated in November was much cheaper than one in June.  I think Eritrean Airlines did the right thing acquiring the aircraft of choice when price was distressed and market for aircraft experienced significant surplus.

 

With best regards,

“Herui” Abebe Tecle

Miami, Florida