African Export-Import Bank (Afreximbank) has allocated $20 billion to airlines whose countries are members of the continent’s bank.
According to the Senior Manager, Syndications and Specialised Finance of Afreximbank, Samuel Mugoya, this loan is for the purpose of reviving and sustaining airline operation in the continent and only airlines that intend to acquire new aircraft will be beneficiaries from the loan.
Mugoya was speaking at the 25th Air Finance African Conference and Exhibition in Johannesburg, South Africa.
He highlighted various challenges facing African airlines, one of which is that over 60 per cent of their expenses that African airlines make, are done with hard currency, whereas they generate their revenue in local currency.
Another challenge brought up by Mugoya is that African airlines are not able to source long-term loans at single digit interest rates.
According to Mugoya,“A lot of routes are not developed on business principle. A start up airline should begin with domestic operation, then regional operation and the business plan should reflect business reality.
You find many airlines in Francophone countries rushing to operate to Paris, while Anglophone countries rush to go to London without checking the business sense in that route,”
The African Export-Import Bank (Afreximbank) arranged or co-arranged financing totaling $2 billion for African airline operators in 2014.