PARIS – Ethiopian Airlines announced a slew of orders Tuesday at the Paris Air Show, adding to its order book for the Airbus A350-900, the Boeing 777F, the Boeing 737 MAX 8, and the Bombardier Dash 8 Q400.

The orders consist of 10 new Airbus A350-900s, two new Boeing 777Fs, ten new Boeing 737 MAX 8s (converted options), and 5 Q400s (converted options). The orders are collectively worth more than $4.5 billion at current list prices, and grow Ethiopian’s order book to 62 frames on order against a current active fleet of 89 jet and turboprop aircraft.

The A350-900 order is probably the major headline, and it grows Ethiopian’s A350 XWB order book to 24 frames in all. Ethiopian received its first A350 in June 2016 and now has four A350-900s in its fleet, configured with 343 passengers in a two-class configuration (30J / 313Y).

With the A350 order, Ethiopian’s widebody order book now consists of 25 airframes, including 20 A350-900s and five Boeing 787 Dreamliners (one 787-8 and four 787-9s). This compares to an active widebody fleet of 38 frames including four A350-900s, four Boeing 767-300ERs, six Boeing 777-200LRs, four Boeing 777-300ERs, and 18 Boeing 787-8s

Ethiopian A350-900 mission unclear

Ethiopian CEO Tewolde GebreMariam explained the carrier’s rationale for buying more A350-900s:

Operating the youngest fleet in the industry with modern and comfortable customer features in the cabin is one of the four pillars in our 15 years strategic roadmap, Vision 2025, and this order placement for additional A350s is one component of this strategy. The performance, operational and cost efficiencies we have achieved with our initial A350-900s have resulted in these additional ten aircraft order placement and thereby suffice our ever-expanding global network. We will deploy the additional aircraft on our long-haul routes connecting Addis Ababa with destinations in Africa, Europe, the Middle East and Asia.

What is notable in GebreMariam’s comments is the specific exclusion of the Americas and Australia in his comments, as well as the mentioning of the Middle East and Europe as potential A350-900 destinations.

The operating conditions at Ethiopian’s home base at Addis Ababa’s Bole International Airport are affected by the high altitude, as Addis Ababa sits 7,656 feet above sea level. This causes a variety of challenges for aircraft operating performance, including shrinking the effective range of most aircraft due to thrust limitations.

In that context, it is interesting that GebreMariam failed to mention the United States, where Ethiopian Airlines serves just three destinations (Los Angeles, Newark, and Washington D.C. along with Toronto in Canada).

The A350-900 is a longer range aircraft than the 787-8 though the 787-9 is a tad more capable. But the A350-900 could conceivably serve the Eastern United States nonstop, and Ethiopian has taken that option off the table. Ethiopian does have a fleet of six Boeing 777-200LRs, so it could, in theory, serve the US nonstop today if it wanted to.

The destinations that are curiously mentioned are Europe, parts of Africa, and the Middle East, both of which qualify as medium haul missions from Addis Ababa and thus are more optimized for the 787 Dreamliner than the A350-900 per se.

Ethiopian has struggled some on its long distance Asian routes with low fares, as customer perception has not caught up to the carrier’s absolute stature in global aviation. Within Africa meanwhile, Ethiopian is having a hard time extracting cash out of several destination countries, which has constrained the company’s expansion plans and feed in its monopolistic home market (Ethiopia aside).

That latter challenge has caused Ethiopian to pull back on some of its growth plans, though the Vision 2025 strategic roadmap still appears to hold sway. In that sense, these orders for Ethiopian are almost counter-cyclical as they come despite a broader secular unease in African aviation and specific challenges for Ethiopian.

More narrowbodies for regional growth despite aforementioned cash challenges

It is also particularly interesting to see Ethiopian double down on regional growth with the 737 MAX 8s (and to a lesser extent with Q400 turboprops) given the cash challenges in African nations.

Moreover, Ethiopian doesn’t have that many 737s to replace in the first place: 24 737NGs in all (8 737-700s and 16 737-800s), and these MAX orders will not be delivered for several years.

Our view is that Ethiopian will likely deploy at least some of the MAX 8s on longer and thinner routes to Europe and the Middle East/South Asia. At a functional range of 2,700 nautical miles (against the MAX 8’s advertised range of 3,500 nautical miles) most of Italy and Eastern Europe is within range of Addis Ababa, as are all of the Middle East and Central Asia, all of Pakistan, and every major Indian city save Kolkata.

The Q400 turboprops will mostly be used on domestic routes within Ethiopia, where Ethiopian already serves 19 domestic destinations and has several more that once had service. They are good news for Bombardier, whose Q400 backlog had dropped below 100 airframes before the opening of the airshow.

Boeing further closes 2018 777 production gap

The order for two additional 777Fs is not a blockbuster (worth $654.1 million at list prices), but it does constitute a bet on Ethiopian’s part on further cargo growth in its region.

This, like a bet on more African growth, is almost counter-cyclical in the sense that Ethiopian’s bread and butter routes on the continent to resource economies are not necessarily poised to boom in the next couple of years given tanking resource prices.

Per comments from GebreMariam at the press conference announcing the order, it’s mostly about strategic growth:

Building one of the largest cargo terminals in the world and operating new-generation, high-performance aircraft reflects our commitment to expanding and supporting the exponentially growing imports and exports of our country in particular and the African continent in general. The commitment to purchase two 777 Freighters is expected to boost the Ethiopian Cargo & Logistics Services,

The other thing to keep in mind is that Ethiopian in all likelihood paid nowhere near $654 million for those two freighters. In the best of times with the most leverage, Boeing usually gets 60% off list price – for this order, it’s not inconceivable that Ethiopian paid a total under $200 million which makes this order much more understandable. Even if Ethiopian doesn’t need the cargo capacity today, it can acquire it cheaply for the future.

Meanwhile, for Boeing, this allows them to continue to fill the production gap in 2018 for the 777 program as it seeks to bridge production between the 777 Classic and the re-engined 777X. On that front, Paris generated incremental improvement as Boeing won six 777 classic orders through the end of the day Wednesday.