FACE TO FACE JAMES GELDENHUYS

Nedbank’s Aircraft Finance head James Geldenhuys answers Guy Leitch’s questions about the state of post Covid aviation finance in Africa.

- James Geldenhuys

GL: Has Covid and finance defaults made it harder for sub-Saharan African airlines to finance aircraft?

JG: The Covid pandemic and associated fear has certainly damaged the industry on a global scale and we have seen many airlines failing, especially in jurisdictions where no support from government was received by the industry. The demise of so many airlines in a short period has negatively impacted on the risk rating of airlines in general which results in the reduced credit worthiness of airlines. But this is not unique to the African continent.

GL: Does African aircraft finance have its own unique challenges – if so, what are they?

JG: No, African aircraft finance does not have unique challenges. Challenges which we see on the African continent are the same the world over: Sovereign risk, low capitalisation, continuity in management and shareholder support.

GL: What percentage of an airline’s fleet do you think should be leased?

The accepted norm has been 50% for a number of years and it works well. In the current markets it might be attractive to lease more aircraft as there are very attractive lease opportunities available due to many aircraft having been returned to lessors as a result of the difficult market conditions caused by Covid. It might be worthwhile to lease more than 50% of your fleet in the short term, however airlines should be careful not to lose the benefits of owning some aircraft and having a substantive balance sheet.

GL: Do lenders prefer state-owned airlines to private ones?