1. (C) Summary: Eritrean Airlines' operations are hampered
by internal conflicts, incompetent management, and general
socio-economic conditions in Eritrea. The Eritrean
government appointed managers based on patronage rather than
skill or experience, resulting in poor decision making and an
unclear strategic vision for the airline. Passengers are
regularly pulled from the aircraft after boarding, and flight
attendants often do not return to Eritrea on flights to
Frankfurt. End Summary.



2. (C) An Embassy contact familiar with Eritrean Airlines
(EA) said the airline remains a going concern, despite
discontinuing its Asmara-Rome-Frankfurt flights. In early
August, EA's management agreed to sell the airline's 767-200
to Jordan Airways, and lease the plane back from them until
all ticketed passengers' flights were completed on September


30. For unknown reasons, the sale was not completed and the
aircraft is now back on the market. The aircraft can be
viewed at www.planemart.com by searching for 767s.



3. (C) EA's Frankfurt route is seasonal, bringing the
diaspora to and from Eritrea between July and September.
Although EA ceased flying the route on September 30, the
contact said the QiQline will reti landing rights in
Frankfurt in the event Lufthansa stops service to Asmara. EA
would then be the only direct flight from Asmara to Europe.

LONG HAUL VS. SHORT HAUL? AN INTERNAL BATTLE


--------------------------




4. (C) Airline management and the pilots seem to be fighting
an internal battle over the airline's future direction.
Management wants to sell the 767 and replace it with two
MD-80/90s or a 737, and focus on being a regional carrier
with flights to Khartoum, Jeddah, Nairobi, and Cairo. The
pilots argue that long-haul flights are more lucrative and
allow for the airline to engage in charter business during
off-peak travel times when the aircraft are less active.



5. (C) Eritrean Airlines recently leased an MD-80 while the
767 was under repair, resulting in problems airline
management should have anticipated. Passenger and cargo
loads had to be reduced by 50%, given the high altitude and
short runway, in order for the plan to make it to its
destination. The pilots have confronted the airline on
management's desire to swap the 767 for two MD-80s (or 90s),
which the pilots say will be uneconomical and would not allow
the airline to fly to Frankfurt or participate in lucrative
charter service. It's unclear at this time how this
disagreement will play out.

CHARTER OPPORTUNITIES


--------------------------




6. (C) According to the contact, charter companies approach
Eritrean Airlines 10 to 15 times per year to contract charter
flights, but airline management refuses the deals. Many
charter companies demanded that EA maintain a spare engine to
minimize an aircraft's downtime if an engine needs
maintenance. The cost of the engine would be recovered after
a few chartered flights. The GSE decided not to make this
investment.



7. (C) Before the recent border incident with Djibouti, the
contact said un-named Djiboutians offered to utilize the 767
for charters purposes when it wisinot in use. ehes would
have added millions to EA's bottom line, but the offer was
refused.



8. (C) EA's 767 is contracted to fly 20 chartered flights
from Mali to Jeddah for the Hajj, without a stop in Asmara.
However, a different airline contact said the departure point

ASMARA 00000493 002 OF 002


was Nigeria and would include the Asmara leg. Although the
airline could conceivably run cargo on its empty leg, the
contact doubts EA's management will make any agreements.

PASSENGERS PULLED FROM PLANES AFTER BOARDING


--------------------------




9. (C) On nearly every EA flight, between one and five
passengers are removed from the plane after boarding. The
contact stated that in one instance the plane had already
taxied to the end of the runway for takeoff when the tower
called the plane back to check a passenger's foreign currency
declaration card. My contact believes that even if the
flight were airborne and ordered by the tower to return to
Asmara, the pilots would comply.

FLIGHT ATTENDANTS' FLIGHT, AND CAPTAINS' POOR HEALTH


--------------------------



--------------------------




10. (C) EA loses one or two of the flight's seven flight
attendants as asylum seekers on every flight to Frankfurt,
including one flight in mid August when five of the seven
deserted. The contact also said neither of EA's 2 captains
could pass the required medical tests to retain their
licenses if the tests were conducted by objective doctors,
adding that Eritrean physicians were paid to give the
captains a clean bill of health.



11. (C) Comment: QEQ's operationspovide yet another example
of the Eritrean government's abysmal track record of running
businesses. The airline declined, without explanation, many
opportunities to earn hard currency revenue from the
lucrative charter business. Even when airline management
agrees to charter their aircraft, they ignore additional
profit-making opportunities, such as hauling cargo on the
empty leg. EA's management practices further demonstrate
that the Eritrean government views domestic businesses as
merely tools of government policy, rather than independent
profit-earning entities. End Comment.
TABLERSTONE