High-risk factors, low operating capital hamper aircraft leases for African airlines

The consensus is that aircraft lessors and financiers are still reluctant to lease or finance aircraft to African operators, which are considered high risk relative to other placement opportunities.

The reason for that is that prospecting in the African continent and ostensibly operating with barely enough working capital.

Due to the higher perceived risk of investing in Africa, aircraft lessors and financiers are less receptive to financing African carriers via aircraft lessors rather than as direct lending deals.

The biggest challenges are political uncertainty and civil unrest. Take Sudan as an example; with reports of aircraft being destroyed at Khartoum International Airport, Lessors may charge (if they are not already doing so) a premium for aircraft flying into this type of region.

Despite the fears, not a few experts are of the view that it would be rewarding for them to explore the prospect of aircraft leasing.

Also, those desirous of joining the class of successful startups, and the surviving startups with the impetus to break even in record time, and with the view to progress to making a profit, should also give careful consideration to leasing, or like you rent a car, rent aircraft to reducing drastically the financial burden of acquiring brand new aircraft.

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It has also been explained that such a decision would enable an investor/airline operator to save at least 30 percent of the cost of brand-new aircraft hence, helping the investor to possess financial resources that could be used in another vital arm of operations and ultimately provides the much crucial tail wind for record financial success.

However, there are caveats deserving of serious attention so that success could be made of the reasonable investment in aircraft leasing by both the lessor and the lessee.

 

Nigerian airlines

This much was inferred from the panel discussion organized by the renowned non-government organization with the resolution to promote air safety, and profitable commercial air transport in Africa, AVIASSIST.

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Given the rationale for the subject at the panel discussion dubbed, FOCUS, and with the theme, Safety of Aircraft Leasing, Mr. Tem Kok, Director, of AviAssist Foundation said over fifty percent, (50%) of the aircraft in the skies are leased.

Kok noted that by that statistical fact, aircraft leasing cannot be a bad idea. He called the panelists’ attention to the issue of the complex lease agreement that has often been the subject of litigation when agreement goes awry.

He also called the attention of the panelist to the issue of aircraft registration and which country would exercise oversight, is it the country of registration or the country of operation?

Having set the ball rolling, Tel Van Zundert, an aircraft remarketing expert, who works with SGI Aviation, enumerated circumstances that often compel leasing of aircraft.

Zundert said route expansion oftentimes makes leasing imperative. He added that smart firms that yearn for a reduction in their capital outlay often avoid new aircraft but opt for a lease.

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He also added that oftentimes when one or two aircraft are on routine check, the scheduled commercial operator wouldn’t want to lose its slots, and the airline management doesn’t want to invest in maintenance and ultimately lose loyal customers and money hence, lease aircraft often saves airlines’ much worries.

Richard Jacobs, Chief Commercial Officer, True Noord, emphasized that lessors are often very rabid about documentation and strict compliance to the maintenance schedule of a particular aircraft.

He stated that operators in Africa should rapidly embrace leasing to stimulate their growth as Africa’s potential in growing air travel is the second largest growth potential in the world, waiting to be harnessed.

 

Wole Shadare