Air travel in Africa has faced significant challenges due to the impact of the Covid-19 pandemic, limited access to credit, and high operating costs. In a bid to address these issues and boost the continent’s aviation industry, the African Development Bank (AfDB) recently held workshops with aircraft manufacturers Airbus and ATR. The workshops focused on exploring avenues to strengthen access to finance for African airlines and developing financing instruments tailored to Africa’s aviation needs.
Boosting Access to Finance
The workshops, conducted on June 14 and 15, aimed to support the AfDB’s efforts in facilitating the growth of Africa’s air transport market. Discussions revolved around various financing instruments, including guarantee products, credit risk assessments, and the outlook for Africa’s aircraft market. As part of its plans, the AfDB is assessing the feasibility of establishing an aircraft leasing platform, considering that operating leases comprise over 45% of operational fleets worldwide.
Representatives from the AfDB and the manufacturing firms engaged in dialogues concerning potential sources of financing. These discussions encompassed export credit agencies, multilateral development banks, non-payment insured financing, and sovereign support. By exploring diverse financing options, the parties aim to alleviate the constrained access to credit faced by African airlines, thereby supporting their viability and growth.
Addressing Affordability and Accessibility
Air travel in Africa remains unaffordable for many due to high operating costs and limited passenger traffic. To increase profitability, carriers have been forced to raise fares, leading to intra-Africa flight prices that are 2-3 times higher compared to other regions. Furthermore, a significant portion of air traffic is concentrated in a few airports, such as Cairo, Johannesburg, Casablanca, and Addis Ababa, leaving many routes underserved. This situation highlights the need to enhance connectivity and expand air transportation across the continent.
Despite the challenges, Africa’s economies are projected to recover from the pandemic, presenting opportunities for growth in the aviation industry. Economic recovery is anticipated to result in the delivery of 1,230 new wide and single-aisle aircraft and 230 turboprop planes by 2040. Additionally, the implementation of the African Continental Free Trade Area is expected to drive a 28% increase in intra-African freight demand by 2030, requiring an additional 250 aircraft for transportation.
The workshops concluded with the understanding that the AfDB needs to conduct further assessments and interventions in the aviation market. To this end, a feasibility study for an aircraft leasing platform is set to be completed by the end of 2023. The collaboration between the AfDB, Airbus, and ATR signifies a significant step towards strengthening the African aviation sector, increasing access to finance, and fostering sustainable growth.
