DJIBOUTI - Civil aviation authorities in Djibouti have denied the Ethiopian Airlines permits for operation flights last week, reliable sources disclosed to Fortune. Ethiopia's national flag carrier has subsequently suspended its scheduled passenger flights to Djibouti indefinitely, as of August 1, 2010, Fortune has confirmed.

Officials at Ethiopian were unwilling to comment on the details of the cancellation, except to say that it was due to "operational reasons."

"There are negotiations going on between the two countries," Girma Wake, chief executive officer (CEO) of the airline, told Fortune. "They have some demands . . . The suspension is only until some sort of agreement is reached."

Djibouti has long voiced its unhappiness about the type of aircraft used for flights to its airport and has been demanding the Ethiopian government to provide a Boeing 737 aircraft, sources disclosed.

Ethiopian Airlines used to fly Fokker 50 aircraft but changed to new Q400 aircraft after acquiring five from Canadian plane manufacturer, Bombardier, in March 2010.

"Despite the demand of Djibouti for a Boeing aircraft ..., the national flag carrier has not complied because of a lack of the large number of passengers [required] to