By; OLIVIA NNOROM
The African Development Bank (AfDB) has taken initiatives to strengthen access to finance for African airlines and support the development and growth of the aviation sector in Africa.
In June, the AfDB organized workshops in collaboration with aircraft manufacturers Airbus and ATR.
During the workshops, discussions were held regarding the bank’s financing instruments, including guarantee products, credit risk assessments, and the outlook for Africa’s aircraft market.
The AfDB is exploring the feasibility of establishing an aircraft leasing platform, as operating leases constitute a significant portion of operational fleets globally.
Also during the workshops, the participating parties focused on various sources of financing, such as export credit agencies, multilateral development banks, non-payment insured financing, and sovereign support.
These discussions aimed to explore different avenues for financing aircraft acquisition and development in Africa.
Although Africa’s economies are expected to rebound to growth from the pandemic through economic recovery projected to lead to the delivery of 1,230 wide and single aisle new aircraft and 230 turboprop planes through 2040, it is still important to note that the COVID-19 era severely impacted the sector.
Prior to that, African aviation represented a roughly 3% share of the global market, despite occupying 17% of the world’s population.
This is due to a difficult operating environment that includes constrained access to credit, only a few African airlines are profitable. High operating costs, coupled with low passenger traffic, drive fare hikes as carriers try to increase their profitability.
As a result, air transport remains unaffordable for the average African. In recent years, airfares for intra-Africa flights are observed to be 2-3 times higher than in other regions of the world.
Despite efforts by governments, public institutions and private stakeholders, a large share of air traffic flows through a few airports, particularly those of Cairo, Johannesburg, Casablanca, and Addis Ababa, leaving many other routes un- and under-served.
A recent study undertaken by the Economic Commission for Africa (ECA) suggests that implementation of the African Continental Free Trade Area will lead to a 28% increase in intra-African freight demand through 2030. That projected growth will require 250 additional aircraft, which will need to be financed.
This is why this collaboration is important, with AfDB’s efforts aimed at supporting the recovery and growth of the industry. By enhancing access to finance and developing tailored financing instruments, the AfDB aims to facilitate the expansion of air travel and boost the air transport market in Africa.
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