DEMAND for tailored aviation financing solutions in Africa is booming in line with the continent’s new-found prominence on the global economic stage, says Melanie Humphries, head of Investec Aviation Finance for Africa.
Outlining Africa’s business aviation growth prospects she says that although Africa was once viewed as something of a pariah, the continent has emerged as the third-fastest growing region, surpassed only by Asia and the Middle East.
"Many African nations have breached the 5% GDP growth barrier. There is high correlation between GDP growth and air traffic growth. In the African commercial aviation sector, this has held true," says Ms Humphries.
"Airlines such as Ethiopian Airlines, Kenya Airways, South African Airways and Comair have all embarked on successful capital raising projects for the renewal and expansion of fleets.
"In the context of business aviation, it is not surprising that the African market has successfully weathered the economic downturn. Africa is forecasted to grow its business aviation fleet from 350 in 2012 to about 960 aircraft (post retirements) by 2022, according to the latest Bombardier Business Aviation Forecast, which represents about 1,000 new aircraft deliveries and is in line with expected economic growth and wealth creation on the continent.
"Albeit off a small base, the private aviation sector is, quite literally, taking off. In Nigeria, for example, it has been reported that the number of privately-owned aircraft rose by 650% between 2007 and 2012.
"Regional scheduling challenges, a requirement for quick turnaround times, Africa’s sheer size, lack of road and rail infrastructure and a need for privacy have facilitated the shift towards such purchases," says Ms Humphries, adding that in Africa a business jet is a critical business tool for high net worth individuals and corporate clients.
However, she says the business aviation market is not without its challenges. Lack of infrastructure development and support in the form of fixed-base operators and maintenance centres remain an issue, but in the past few years there has been an increase in training and capital investment.
Ms Humphries says from an aviation and aircraft financing perspective, Africa holds great promise. The question is how the new and pre-owned aircraft deliveries will be financed.
Although upbeat about Africa’s aviation finance prospects, Investec is cognisant of the specific challenges to be addressed and requirements that are critical in making a transaction bankable.
"First and foremost are the requirements of the client and, in our experience, a one-size-fits-all approach is rarely acceptable. Business jet owners demand tailor-made solutions that are based on their specific business or personal requirements and that are cost-efficient and flexible," says Ms Humphries.
"This can only be achieved through a detailed understanding of your client. Second, financiers require access to strong sponsors, timeous and credible financial information with a strong reliance on the asset and ultimate serviceability.
"In our experience, turnkey structuring, quality advice and options regarding suitable financing sources that are easy to understand and access are critical components in any aviation finance transaction.
"We take a holistic approach to clients, focusing on multiple touch points including private banking, wealth management, corporate finance, structured lending and not just the aviation finance transaction at hand."
Also important, according to Ms Humphries, is the relationship between client, bank, aircraft operator and, in the case of a new aircraft delivery, the manufacturer. In working together, the best solution for the client can be achieved.
She says post delivery the "tripartite" relationship between client, bank and operator becomes critical in ensuring a client’s satisfaction, but also to protect the bank’s interest in the business aircraft as security.
"It is apparent that financial innovation and aviation finance expertise will become a necessity rather than a nicety in supporting this industry. We feel optimistic about the availability of funding for deals in Africa."
