Air Transport World

Silver lining in Africa: while the continent's carriers still face problems, mutual mistrust among financiers and lessees seems to be melting.

The mutual distrust that long characterized relations between those involved in aircraft financing and leasing, and the African air-transport industry has diminished, if not ended. This was evidenced in formal presentations and off-the-floor discussions at the recent AFRAA/African Airlines conference on aircraft leasing and maintenance (ATW, 11/92).

Nonetheless, it was made abundantly clear that banking and leasing institutions wilt remain wary of the African market until many fundamental changes are made in the industry.

"A yellow warning flag to potential financiers, lessors and the World Bank is raised by the lack of African airline-management stability and frequent bureaucratic/governmental interference in the commercial affairs of African carriers," Steven Udvar-Hazy, president and CEO of International Lease Finance Corp., told the Cairo conference. He said that Africa's lack of airline-management proficiency and continuity has reached "critical proportions." He described as "alarming" African lack of emphasis and resources on training, particularly in middle management, and refinement in the customer-service area.

Udvar-Hazy also lamented the African industry's lack of in-house technical self-sufficiency, citing Ethiopian Airlines, Royal Air Maroc and SAA as exceptions, requiring the purchase of technical services outside the continent, thereby creating "unmanageable extra cost and a drain on foreign exchange." He called for the sharing of regional technical facilities with some airlines developing a regional specialization on one type.

By way of example, he noted that 25 different carriers operate 117 Boeing 737s, yet only eight of them have total 737 capabilities up to D-. check levels. He observed that only about 30% of 737 maintenance is performed in Africa with more than 60% being done in Europe by facilities such as those of Team Aer Lingus, Air France and Lufthansa.

ILFC forecasts that between 1993 and 1997, African airlines will need 125 new jets and 210 turboprops, and most likely, 30-40 more jets in the 1998-99 period at an aggregate cost of $9.2 billion. Less than 3% of that sum, or $270 million, will be net cash flow generated by the carriers' profit and loss and appreciation, minus the servicing of existing debt obligations, according to the forecast. …

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