Absa eyeing aircraft deals in Africa

Absa has poached a team of bankers from rival Nedbank to begin financing aircraft deals in Africa.

Late in 2018, SA’s thirdlargest bank hired Morne Visagie, who spent 13 years at Nedbank, to head its structured finance and aircraft funding businesses, David Renwick, head of global finance and trade at Absa’s corporate and investment bank, said.

He brought three other members of his team with him.

“They have a mandate and they’re quite active,” he said.

“We’ve a couple of live transactions at the moment.”

The lender is encroaching on territory dominated by local competitors Investec and FirstRand, and international banks such as Standard Chartered and BNP Paribas.

After breaking loose from its former British parent, Barclays, Absa is chasing extra sources of revenue in Africa as it seeks to grow faster than its local competitors until 2021.

Nedbank, which also funds airlines in the Middle East, said it would not stand still and remained active in the segment, despite losing staff.

An uptick in commodity prices was also increasing the number of countries it could target, the lender said.

While full of promise, Africa’s aviation industry is hampered by poor management, costly monopolies and high taxes on fuel that make operating costs among the highest in the world, according to the Centre for Asia Pacific Aviation.

“Some African airlines have credit-quality challenges, but there are some which do not.

“If you can take a good view of the tradability of some of these assets in the secondary markets, should you need to restructure their debt, I think there is a good client base across Africa,” Renwick said.

Inadequate road and rail infrastructure and the size of Africa made it an attractive proposition for growth in the sector, David Minty, head of Investec’s 22-member aviationfinance division, said.

Investec was also targeting a number of African airlines over the next year, he said.

The lender recently joined La Banque Postale in providing an €18m (R277m) senior debt facility to EWA Air, which is based on the French island of Mayotte, for the purchase of two aircraft.

Faster economic growth and an expanding population create an increased need to get the industry off the ground, Minty said, adding that limited infrastructure, volatile fuel prices and exchange rates, and lack of scale hinder its success.

Sub-Saharan Africa’s population could increase by more than a billion to 2.2-billion in the 20 years to 2050, according to UN projections.

But airline passenger traffic growth is the slowest in the world, rising an estimated 3.6% in 2018, compared with a global average of 6.5%, according to the International Air Transport Association.

Capacity probably climbed 1.4% versus 6% worldwide, it said. –