THE African Development Bank (AfDB) recently conducted workshops with leading aircraft manufacturers Airbus and ATR on June 14 and 15, aiming to explore innovative ways of enhancing access to finance for airlines across Africa. These sessions reflect the Bank’s commitment to developing and adapting financing instruments tailored to the continent’s aviation needs, with the ultimate goal of boosting the air transport market in Africa.
During the workshops, discussions revolved around various bank financing instruments, including guarantee products, the bank’s approach to credit risk assessments, and the potential for Africa’s aircraft market. Of particular interest, the AfDB is currently studying the feasibility of establishing an aircraft leasing platform, considering that operating leases constitute more than 45 percent of operational fleets globally.
Representatives from the AfDB, Airbus, and ATR also delved into exploring different sources of financing, including export credit agencies, multilateral development banks, non-payment insured financing, and sovereign support. Such comprehensive discussions aimed to pave the way for more effective and accessible financing options for African airlines.
The Covid-19 pandemic has severely impacted air travel on the continent, causing significant disruptions to the industry. Prior to the pandemic, African aviation accounted for only about 3 percent of the global market, despite Africa being home to 17 percent of the world’s population. Limited access to credit has contributed to the financial challenges faced by many African airlines, leading to profitability issues and making air transport unaffordable for the average African. High operating costs and low passenger traffic have driven fare increases, resulting in airfares for intra-Africa flights being 2-3 times higher than in other regions of the world.
Efforts by governments, public institutions, and private stakeholders have attempted to address these challenges, but a significant portion of air traffic still flows through only a few airports, leaving many other routes underdeveloped. However, with Africa’s economies projected to rebound from the pandemic, there is hope for growth in the aviation sector. Economic recovery is expected to drive the delivery of approximately 1,230 new wide and single aisle aircraft and 230 turboprop planes through 2040. Furthermore, the implementation of the African Continental Free Trade Area is anticipated to lead to a 28 percent increase in intra-African freight demand by 2030, necessitating an additional 250 aircraft.
One
key takeaway from the workshops is that the AfDB will further evaluate potential interventions in the aviation markets while awaiting the completion of the feasibility study for the leasing platform, which is expected to be finalized by the end of 2023. This collaborative effort between the AfDB and aircraft manufacturers Airbus and ATR holds promise for fostering sustainable growth and accessibility in Africa’s aviation industry.
