African Export-Import Bank (Afreximbank), a bank committed to reviving and sustaining airline operation in the continent, has earmarked over $20 billion for airlines from member-African countries as syndicated loans to acquire new aircraft.
Speaking at the 25th Air Finance African Conference and Exhibition in Johannesburg, South Africa, Senior Manager, Syndications and Specialised Finance, Afreximbank, Samuel Mugoya, said one of the major challenges faced by African airlines is their inability to source long-term loans at single digit interest rates.
He said another challenge many African airlines face is that over 60 per cent of their expenses are done with hard currency, whereas they generate their revenue in local currency. He added that part of the guarantee for the loan is the aircraft, which is a huge asset.
He stated that before the bank offers to give loan to any airline, it must be convinced about its business plan, which must be in tandem with the reality of its operational environment.
“A lot of routes are not developed on business principle. A start up airline should begin with domestic operation, then regional operation and the business plan should reflect business reality. You find many airlines in Francophone countries rushing to operate to Paris, while Anglophone countries rush to go to London without checking the business sense in that route,” Mugoya said.
Mugoya also disclosed that Afreximbank is planing to establish a leasing company to help smaller airlines, which may not be able to access its loans and also help in the growth of airline industry in the continent.
“We may establish a leasing company so that we could lease aircraft to smaller airlines or we work with lessors or establish a platform to cover the broad spectrum of the continent. We need to provide funding to our member states,” Mugoya added.
