CJI Middle East & Africa: Advice pays for African aircraft transactions

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Gaining good advice is an essential first step when planning an aviation investment in Africa, according to speakers taking part in a panel dedicated to aircraft finance on the continent.

The forum’s moderator Dawit Lemma, founder and CEO of Addis Ababa-based Krimson Aviation, said: “Financing is a major, major, major issue here on the continent of Africa.” But, since there are 54 countries in Africa, there could be no single solution for those looking to purchase, charter or lease an aircraft, he told delegates to Corporate Jet Investor’s Middle East & Africa 2020 online conference.

Michael Nelson, partner with law firm Clyde & Co, agreed. “One of the big issues for new owners coming to the market is financing. If you are not reliant on financing for the acquisition of aircraft, that’s great. But if you are depending on financing, its availability is a bit more limited in Africa than other parts of the world and it can create problems.”

‘Availability is a bit more limited in Africa’

Sound advice, which takes into account regional conditions, is the key to achieving a successful outcome. “I’ve seen owners come into the market and get themselves into long-term difficulties,” said Nelson.

Philip Du Preez, ExecuJet Africa manager operations, urged prospective buyers to find individuals within banks who understand aviation asset finance and related matters such as insurance. “We see one, two or three players from a classic banking point of view who understand aviation finance and operations,” said Du Preez.

“What is also important is the opportunity that independent consultants bring,” he added. “They are able to prepare documents and applications as the banks would like them to be prepared.” In South Africa, for example, the best financing options may be offshore and consultants can play a key role in facilitating transactions. “That’s because you don’t have someone in the classic banking structure who understands aviation,” said Du Preez.

‘Banks which are less experienced’

Nelson outlined the pitfalls of structuring aircraft transactions without special regard to the nature of the sector. “Too often, I’ve seen banks which are less experienced with the asset produce a corporate banking deal or a real estate deal,” he said. “They don’t consider the need to take specific security over the aircraft, references, warranties and key contracts.

“Also they don’t take local advice in the relevant jurisdictions – where the aircraft is registered or where the SPC [special purpose company] is and keep up the continual monitoring of the aircraft; both through the operator and the owner to make sure there are no issues.”

The best financing option was still the private wealth banks in his opinion, he added.

The conference – Corporate Jet Investor Middle East & Africa 2020 – took place on Wednesday September 16th. You can listen to the free access conference by registering here.

Dawit Lemma, founder and CEO of Addis Ababa-based Krimson Aviation.

 

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