Leasing: A key enabler of aviation growth in Africa

The full-service aircraft asset management firm, ABL Aviation, is strategically expanding its portfolios to capture leasing and financing opportunities in Africa.

ABL Aviation CEO Ali Ben Lmadani. Image: ABL Aviation

According to ABL Aviation, despite numerous headwinds and challenges, opportunities abound in the aviation market. The aviation industry has undergone an interesting shift explained the firm’s CEO, Ali Ben Lmadani. Initially, there was a supply crisis marked by manufacturing delays and disruptions whereas today demand is driving the market. 

Airlines are increasingly turning to leasing solutions as they are flexible and cost-effective, especially in a highly-uncertain economic environment. This trend is poised to continue during the post-pandemic recovery phase.

“At ABL Aviation, we understand this shift and are well-positioned to support airlines during this period. We provide several flexible financing solutions tailored to each airline's specific needs. Our in-house team, which comprises experienced technical specialists and industry professionals, allows us to go beyond just financing. 

“We can work closely with airlines to identify operational efficiencies and develop solutions that support their financial health and long-term growth goals. 

“While the African industry has promising growth potential due to indicators, such as an expanding middle class, economic growth, and urbanisation, which are increasing demand for air travel, challenges such as diverse regulatory systems and risk perception create barriers, making market players hesitant to provide financing solutions in the region. 

“This is a challenge that airlines in this region will have to overcome to expand their fleet using the lease option,” said Lmadani.

He added that anticipated increased trading activity in 2024 presents opportunities as lessors need to rebalance portfolios and exposures.

Competitive financing solutions, such as JOL (Japanese Operating Lease) and JOLCO (Japanese Operating Lease with Call Option) transactions, offer airlines low-cost funding options, facilitating growth and fleet renewal efforts amidst higher lease rates and fuel costs. 

“Our success with Turkish Airlines' JOLCO deal, which won ‘JOLCO Deal of the Year’ at the Airline Economics Aviation 100 Global Leaders Awards 2024, is a notable example of why we believe this financing option could be a game changer for airlines in Africa.” 

For JOLCO deals, the airline operates the aircraft just like a standard lease, but they also have the option to buy it outright at a defined price in the future. Also, there is no need to produce a large sum of money upfront, which can often be critical for airlines in developing regions like Africa.

The perception of risk in the African aviation market remains a challenge. If some lessors are still cautious about financing airlines in the region, Ali Ben Lmadani has good news. “We are seeing some forward-thinking African airlines embrace JOLCO.

Lmadani points out that lessors play a crucial role in enabling fleet renewal and sustainability efforts, funding a significant portion of new aircraft deliveries and providing flexibility to airlines. “As manufacturers ramp up production, the leasing market is poised for growth, offering capital efficiency and flexibility to meet market demands.” 

Some forward-thinking African airlines are embracing leasing solutions to support their growth strategies.

Ethiopian Airlines leads the pack with its ambitious growth plans, leveraging leasing to expand its fleet capacity and extend its reach across regional and international routes. Kenya Airways, amidst financial challenges, is optimising fleet management through leasing, allowing it to allocate resources strategically while expanding operational capabilities. South African Airways has historically employed leasing to modernise its fleet and adjust operations to market demand. 

Anuradha Deenapanray

Anuradha Deenapanray

Anuradha is a francophone editor for African and Arabian Aerospace magazines.