The Banking Problem in African Skies

There are industries in which money follows opportunity. Aviation is one of them. There are also industries in which the absence of appropriate financing prevents the opportunity from ever becoming a reality. African aviation belongs increasingly to the second category.

The continent has people who want to travel, businesses that need to move, airports that want to expand, airlines that want to acquire aircraft, cargo operators that need equipment, maintenance companies that need facilities and governments that want connectivity.

What is often missing is not the demand, the ambition or even the resources. It is patient, specialised and appropriately structured capital.

That is why I propose that Africa should seriously consider establishing a Bank of Aviation. Let us be clear: what is needed is not another commercial bank with an aviation desk.

Not another government intervention fund that appears when an airline is already in distress. And certainly not a financial institution created to keep chronically inefficient airlines alive.

A Bank of Aviation would be a more purposeful initiative: a specialised financial institution dedicated to financing the infrastructure, equipment, enterprises and ecosystems required to build a competitive African aviation industry. Readers of these pages will know it is not a position, but the case is stronger now than it has ever been.

The first mistake when discussing aviation finance is to treat aviation as merely another commercial activity. Let me repeat what I keep saying at every turn: Aviation is infrastructure.

Aviation connects markets, people, capital, skills, tourism, trade and investment. IATA has made this case precisely, describing aviation as economic infrastructure for Africa and calling on governments to treat it as a strategic enabler of development. Yet the financial architecture supporting African aviation remains remarkably weak.

African airlines are expected to generate only about $200 million in net profit in 2026, a margin of about 1%, despite approximately 6% demand growth.

African carriers remain the least profitable regional airline group because of high fuel costs, fragmented markets, older fleets, high taxes and charges, and other structural disadvantages.

More recently, the outlook has deteriorated further under higher fuel prices and geopolitical disruption, with IATA forecasting an even thinner 2026 margin for African airlines. This is not simply an airline profitability problem. It is a capital problem.

You cannot operate an airline without aircraft. That sounds obvious, but the financing implications are profound. An aircraft is an extraordinarily expensive asset, purchased in a currency that is usually stronger than the one in which the airline earns much of its revenue.

Aircraft are financed through a mix of equity, debt, leasing and manufacturer arrangements. The financial sophistication required to structure these transactions is substantial.

African airlines frequently face the additional burden of high country risk, currency volatility, limited access to foreign exchange and relatively weak balance sheets.

Research has identified limited financial capacity and access to capital as constraints on fleet expansion and network development in Africa.

We must include aircraft and spare parts shortages, small average fleet sizes, and foreign-currency constraints as factors limiting growth.

The African airline is trapped in an uncomfortable cycle. It needs more aircraft to expand. It needs expansion to improve connectivity and economies of scale.

But it needs stronger finances to obtain the aircraft. And it needs the aircraft and stronger networks to improve those finances. That is precisely the sort of cycle specialised finance is designed to break.

One might ask: why create another bank? Commercial banks already finance businesses. Aircraft lessors already exist. Development banks already provide infrastructure finance. Governments already have intervention funds. All true, but aviation finance is not ordinary corporate lending.

An aviation lender must understand aircraft values, residual values, leases, maintenance reserves, engine cycles, route economics, traffic rights, airport concessions, aviation insurance, foreign-exchange exposure, aircraft registration, repossession risks and international aviation law.

To do business with aviation, you must understand that a Boeing 737 is not simply an expensive machine. It is a mobile financial asset whose value depends on its age, configuration, maintenance status, market demand and ability to operate in particular jurisdictions.

The lender or investor must understand the difference between financing an airline and financing an airport. It must understand why a maintenance, repair, and overhaul facility may be more strategically valuable to a region than to another airline. It must understand cargo. It must understand the value of training. It must understand aviation technology.

Aviation needs bankers who understand aviation, and aviation professionals who understand finance. The place to bring them together will be in an aviation bank.

The next logical and legitimate question is what this bank will finance. Let us start by clarifying that a properly conceived Bank of Aviation should not be an airline bailout institution. Its mandate should cover the wider aviation ecosystem.

The African Bank of Aviation will provide long-term financing and leasing support for qualifying airlines seeking to acquire new or used aircraft.

It will also finance the replacement of inefficient and ageing aircraft, fund airports, terminals, hangars, cargo facilities, navigation infrastructure and associated projects, and finance MRO facilities so that African airlines do not have to send aircraft thousands of kilometres away for maintenance that could be performed competitively within the continent.

It will fund aviation academies, simulators and professional training infrastructure, support digital ticketing, payments, revenue management, safety systems, air-traffic technologies and other aviation technology companies, finance warehouses, cold-chain facilities, cargo terminals and specialised logistics infrastructure, and finance renewable-energy systems, efficiency improvements, sustainable aviation fuel infrastructure and other transition investments.

The objective would be to create a financial ecosystem for aviation, rather than merely finding money for airlines. The Bank should finance viability, not failure, and this distinction is essential. Africa has had enough experiences in which public money is used to postpone rather than solve structural problems.

An African Bank of Aviation should therefore apply strict commercial and developmental criteria. It should ask: Is the project viable? Is the management competent?

Is the route commercially defensible? Is the governance credible? Is the financing structure sustainable? What is the security? What is the exit? And perhaps most importantly: Does this investment increase the productive capacity of African aviation?

The prediction is straightforward. A bank that lends simply because an airline is politically important will eventually become a warehouse for bad debt. A bank that finances viable aviation assets and businesses can become an engine of transformation.

Allow me to be the first to say that the idea is not as radical as it sounds. The aviation industry already has specialised financial infrastructure.

IATA’s financial settlement systems processed more than $471 billion in 2024, facilitating transactions among airlines, travel agents, freight forwarders and other aviation stakeholders.

In 2025, IATA reports that its financial settlement systems processed $492.4 billion. These figures are important. They demonstrate that aviation is already a financial ecosystem of extraordinary scale.

The question is why Africa should remain primarily a consumer of global aviation finance rather than developing stronger institutions capable of mobilising and structuring capital for its own aviation development.

A Bank of Aviation could work alongside institutions such as IATA, AFRAA, African development finance institutions, commercial banks, aircraft manufacturers, leasing companies and institutional investors. It would not replace them. Rather, it would connect them.

This concept might be more compelling as a multinational African aviation finance entity rather than a traditional bank created by a single government.

Let us imagine together a structure that includes African governments, development finance institutions, sovereign wealth funds, pension funds, commercial banks, airlines, airports, institutional investors, aircraft manufacturers, leasing companies, and insurance institutions.

The bank could be capitalised through a combination of paid-in capital, guarantees, institutional investment and carefully structured bonds.

Its balance sheet could then support projects that ordinary commercial banks might regard as too specialised or too long-term.

This is precisely where development finance can make a difference: not by replacing the market, but by enabling commercially viable investments where risk, tenor, or information asymmetry otherwise prevents capital from entering.

A governance question must not be avoided from the outset. If airlines alone control the bank, there will be a temptation to prioritise airline financing.

That would be too narrow. The aviation ecosystem is much larger. The shareholders should include institutions with long-term capital and a development perspective, while the governance structure should include strong professional representation from aviation, finance, risk management, law and infrastructure.

Lending policies should be strict and well-regulated, including independent credit committees, transparent procurement, audited accounts, and professional risk management. No borrower should be exempt from these standards, even if they bear a national flag.

An airline failing to meet the bank’s commercial and governance criteria should not qualify for funding merely because it represents a nation’s symbol. The bank’s goal is to support the growth of African aviation, not to shield poorly managed airlines from accountability.

This proposal should not be misunderstood. Money cannot solve every African aviation problem. The continent still needs regulatory reform, open markets, better infrastructure, lower taxes and charges, improved safety systems, stronger institutions and more seamless connectivity.

Only about 19% of intra-African routes have direct flights, while African airlines continue to face high costs and limited profitability. There is also the problem of blocked airline funds. IATA reported that African countries accounted for the largest share of globally blocked airline revenues, with US$774 million blocked in Africa as of the end of March 2026.

A bank cannot make a government honour its currency obligations. It cannot liberalise air services agreements.

It cannot remove visa restrictions. It cannot turn an incompetent regulator into a competent one. A bank can, however, do something governments often struggle with, namely provide disciplined, specialised and patient capital. And capital matters.

Let us be clear. The deeper issue is not whether Africa needs another bank. Africa has banks. Africa has development finance institutions. Africa has pension funds. Africa has sovereign funds. Africa has wealthy individuals. Africa has international investors.

The question is whether these pools of capital are properly connected to aviation opportunities. Too often, aviation is discussed as an industry that consumes capital. We should begin discussing it as an industry that creates economic infrastructure and multiplies capital.

A new airport can create a logistics ecosystem. A cargo terminal can expand export capacity. An MRO facility can retain foreign exchange. A training academy can create skilled employment. A fleet expansion can improve connectivity.

Connectivity can boost tourism. Tourism can create businesses. Businesses create jobs. Jobs create incomes. And incomes create demand. That is how infrastructure becomes development. This, ultimately, is the case for a Bank of Aviation.

The purpose should not be simply to help African airlines buy more aircraft. Its purpose should be to help Africa build an aviation ecosystem capable of financing, expanding, and competing globally.

It should finance aircraft, yes, but also engines, hangars, training, technology, cargo, airports, maintenance, renewable energy, logistics, start-ups, infrastructure, and the human capital that holds all of these together.

The aim should be to create a virtuous cycle: improved finance leads to better assets, which enhance connectivity, reduce costs, strengthen businesses, attract more investment, and further improve connectivity.

Those who continue to describe Africa’s aviation challenge as a demand shortage are mistaken. Africa’s aviation challenge is increasingly a shortage of capacity, connectivity and capital. The first two require policy, while the third requires institutions. It is time for Africa to build one.

Let us start with the African Aviation Bank, not to rescue the aviation industry from its past, but to finance the aviation industry Africa will need for its future.

*Anthony Kila, the author of “Strategy Systems and Power in Flight: Lessons in Strategy, Leadership and Institution Building from Aviation”, is a Jean Monnet Professor of Strategy and Development at the Commonwealth Institute of Advanced and Professional Studies (CIAPS). He also serves as Pro-Chancellor and Chairman of the Governing Council of the Michael and Cecilia Ibru University (MCIU). He is the founding Chairman of Sabre Africa Travel Network.

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