In a bid to address the challenge of acquiring newer aircraft faced by carriers in the continent due to paucity of funds, the African Development Bank (AFDB) is attempting to create a leasing platform for African Airlines.
According to projectsportal.afdb.org, the proposed operation is a FAPA grant of USD 340,000 to support the creation of an African Airlines leasing platform project.
The Fund for African Private Sector Assistance (FAPA) is a multi-donor trust fund that provides grants for technical assistance activities to public and private sector entities domiciled in Africa.
The Project addresses the scarcity of financing faced by African airlines, by developing an in-depth Africa-focused leasing market study and strategies to enhance this market. FAPA’s support is particularly crucial in boosting the adoption of these initiatives, as funding will contribute to creating awareness and disseminating key outcomes to aviation professionals.
The Project will create an enabling investment and business climate, by creating a framework that covers both operational and regulatory issues in Africa’s aircraft leasing market.
It will strengthen financial systems across Africa’s aviation industry by enabling the creation of a leasing platform to ease access to aircraft leasing/acquisition for the aviation industry; build competitive infrastructure (in considering Aircraft as part of the aviation infrastructure) and; promoting trade (with air transport as a vector both for passengers and freight).
The Project hinges on the two following components: (i) Development of feasibility study and 5-year business plan for a leasing platform; (ii) Development of a detailed strategic plan for operationalizing the platform. It will be implemented over a period of 12 months from the date of approval.
Project Objectives
The Project, which is in the upstream phase of the creation of the leasing platform, is in line with FAPA’s overarching goal to support the Bank’s engagements in private sector development. Project goal is to create an efficient leasing platform that would strengthen and sustain the development of a viable airline industry in Africa.
This platform, that will mainly target smaller Africa Airlines which have limited, or non-existent options of aircraft acquisition, is expected to offer them more affordable options to access efficient and newer aircraft through operational leases.
The development objective of the project is therefore to address the scarcity of financing for aircraft acquisition and leasing constraints that African Airlines face, thus accounting for the market failure situation in Africa. The Project deliverables will allow the Bank, in addition to its direct contribution to the project, to play a facilitating role between African airlines and the private sector investor, in order to improve access to aircraft financing thus having a significant and positive impact on their current low profitability.
Beneficiaries
Primary beneficiaries of the initiative will be small African Airlines (approx. 50) with a fleet of 15 aircraft or less which will have an improved access to financing of aircrafts for operational leases. Indirect/secondary beneficiaries of the initiative will be (i) traveling public (with modern, environment friendly aircraft and cheaper airfare); (ii) African Governments (released from having to support airlines); (iii) the African Economy through increased trade, investment, GDP boosted by a growing air transport sector, primarily in the 33 countries that have joined the Single African Air Transport Market (SAATM), as their traffic will grow faster but also throughout the continent as the African Continental Free Trade Area initiative takes shape.
