In general, in Python, if you have a byte string, you need to use decoding first to convert it to an internal representation, after which you can encode it to UTF-8. Of course you need to know the encoding \xe0for this to work (I assume your character is encoded using ISO-8859-8):
'\xe0'.decode('iso-8859-8').encode('utf-8')
EDIT:
Note:
Be sure to use the internal representation in your program as long as possible. In general: decoding first (at the input), encoding the latter (at the output).