African Development Bank teams up with airplane manufacturers Airbus, ATR to boost African commercial aviation. Enhances Access to Finance for African Airlines.
The African Development Bank (AfDB) has taken proactive steps to bolster the aviation sector in Africa by organizing workshops with leading aircraft manufacturers, Airbus and ATR. The sessions, which were held on June 14 and 15, aimed to explore avenues to strengthen access to finance for African airlines, thereby supporting the development and growth of the continent’s air transport market.
Air travel in Africa has faced severe challenges due to the impact of the COVID-19 pandemic. Before the pandemic struck, African aviation accounted for only about 3% of the global market, despite the continent being home to approximately 17% of the world’s population. However, the pandemic brought about unprecedented disruptions, leading to significant financial hardships for the industry. As a result, only a few African airlines have managed to remain profitable during these challenging times.
Constrained access to credit has been one of the primary obstacles faced by African airlines, further exacerbating their difficulties. High operating costs, coupled with limited passenger traffic, have forced carriers to increase fares in an attempt to boost profitability. Consequently, air travel has become unaffordable for the average African, with airfares for intra-Africa flights being observed to be 2-3 times higher than in other regions of the world.
The Role of the African Development Bank
Recognizing the crucial role of the aviation industry in Africa’s economic development, the African Development Bank has taken significant strides to facilitate sustainable growth. The recent workshops with Airbus and ATR were instrumental in exploring financing options tailored to the specific needs of African airlines. Discussions centered around bank financing instruments, including guarantee products, credit risk assessments, and the outlook for Africa’s aircraft market.
One noteworthy initiative under consideration by the AfDB is the establishment of an aircraft leasing platform. With operating leases accounting for more than 45% of operational fleets worldwide, this platform could offer a viable solution for African airlines, allowing them access to modern aircraft without the burden of high upfront costs.
During the workshops, representatives from the African Development Bank, Airbus, and ATR also delved into various sources of financing, which included export credit agencies, multilateral development banks, non-payment insured financing, and sovereign support. Exploring diverse funding channels is crucial in ensuring sustainable and stable growth for the aviation sector in Africa.
Despite the challenges posed by the pandemic, Africa’s economies are projected to rebound and experience growth in the post-pandemic era. Economic recovery is expected to lead to the delivery of over 1,200 wide and single-aisle new aircraft and 230 turboprop planes through 2040. Moreover, the implementation of the African Continental Free Trade Area (AfCFTA) is forecasted to drive a 28% increase in intra-African freight demand by 2030, necessitating an additional 250 aircraft that will require financing.
The workshops provided critical insights for the African Development Bank to design potential interventions into the aviation markets. As the Bank continues its feasibility study for the aircraft leasing platform, it remains committed to creating an enabling environment for African airlines to flourish and expand their operations.
The recent workshops between the African Development Bank and leading aircraft manufacturers Airbus and ATR represent a significant milestone in strengthening access to finance for African airlines. By investing in the aviation industry and adopting innovative financing mechanisms, the AfDB is paving the way for sustainable growth and unlocking the vast potential of air transport in Africa. With concerted efforts, the African aviation sector can overcome its challenges, offering affordable and efficient air travel options to the continent’s growing population while fostering economic integration and development.
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