* Flight lands a week after "state of war" declared over
* Families separated by war board Ethiopian Airlines jets
* "God is about to bring us together," says priest on board
* Peace will save airline millions of dollars - CEO (Updates after landing in Asmara)
By Aaron Maasho
ASMARA, July 18 (Reuters) - The first commercial flight from Ethiopia to Eritrea in 20 years landed safely in Asmara on Wednesday to be greeted by dancers waving flags and flowers, cementing a stunning rapprochement that has ended a generation of hostility in a matter of days.
As Ethiopian Airways flight ET 0312 made the momentous switch from Ethiopian to Eritrean airspace, chief executive Tewolde GebreMariam took to the on-board intercom to remind the 315 passengers they were part of history.
"This is the first time that this is happening in 20 years," he said, to cheers and applause from passengers and crew on the brand new Boeing 787 Dreamliner.
Families separated from loved ones since the start of a brutal 1998-2000 border war sat next to dignitaries on the flight, one of two that took off from Ethiopia on Wednesday morning.
Passenger Senait Tesfaye told Reuters she had not seen her grandmother Abrehet for more than two decades. Abrehet, she said, was deported to Eritrea alongside tens of thousands of Ethiopian residents of Eritrean origin at the start of the conflict.
"We have been longing to see her for all these years," the 37-year-old said as she cradled her three-month-old son Naby. "He will now get to spend time with her more than I ever did as a child. Words cannot express the joy we feel as a family."
Other passengers carried flags and wore t-shirts with slogans celebrating the advent of peace.
The airline marked the departure of the planes, the other a Boeing 737, with a message on its Facebook page: "The bird of peace has just flown to #Asmara #Familyreunion #Ethiopia #Eritrea."
The two 90-minute flights were the icing on the cake of a peace push by new Ethiopian prime minister Abiy Ahmed, whose three months in office have turned politics in his country - Africa's most populous after Nigeria - and the wider East African region on its head.
With the 41-year-old former intelligence officer at the helm, the ruling EPRDF coalition has ended a state of emergency, released political prisoners, restored phone links and announced plans to open up the economy - including letting foreigners take stakes in state-run Ethiopian Airlines.
The airline - which operates Africa's biggest fleet - stands to save millions of dollars a year by using Eritrean airspace instead of taking circuitous routes to some Middle East destinations, Tewolde told Reuters.
"This is a big occasion for us," he said.
The importance for ordinary Ethiopians is far greater.
Surafel Demissie, an Ethiopian priest whose parents died during his childhood, had never been to Eritrea - the country of his mother's birth - nor met any family members.
"God is about to bring us together. Today, God dismantled the wall," he said.
Abiy's predecessor as prime minister, Hailemariam Desalegn, told Reuters on board one of the flights that he felt "heartfelt joy".
"There has been hatred between us for the last twenty years - now that has been reversed," he said.
In his boldest move since coming to power in April, Abiy offered last month to make peace with Eritrea 20 years after the conflict in which an estimated 80,000 people died, many of them scythed down by machine-gun fire in World War One-style trench warfare.
Full-blown fighting ended in 2000 but troops have faced off ever since, depriving Ethiopia of access to Red Sea ports and leaving Eritrea to rely on lengthy military conscription to repel the threat from its giant neighbour.
Indefinite national service is the main reason thousands of young Eritrean men flee every month, many making the perilous journey across the Mediterranean in search of a better life in Europe.
Acknowledging that the conflict was placing an unsustainable economic burden on both sides, Abiy has since visited Asmara and Eritrean President Isaias Afwerki reopened his nation’s embassy in Addis Ababa on Monday.
The countries barred their citizens from visiting each other during the conflict and foreigners wanting to travel from one country to the other had to connect via a third country.
"It is crazily expensive," said one Kenya-based Eritrean businesswoman. (Reporting by Aaron Maasho Writing by Elias Biryabarema and Ed Cropley Editing by Alison Williams and Andrew Heavens)