Indications have emerged that commercial
banks are extending finance offers to business moguls, influential
politicians and companies interested in buying private jets.
Aviation industry sources say many banks
are now unwilling to fund the operation of domestic airlines, including
the purchase of aircraft, where they recorded huge bad debt in the
past.
The Asset Management Corporation of Nigeria bought over N132bn bad loans from the domestic airlines to save them from dying.
Top players in the aviation sector told
our correspondent that some banks had started approaching influential
businessmen and corporate bodies with the offer to fund their
acquisition of business jets.
According to them, the banks are looking
at working out partnerships with foreign aircraft manufacturers in
Europe, the United States and other countries to make the financing
process a standard process.
Some foreign-based financial
institutions, they noted, might also be involved in the planned
financing partnership between Nigerian banks and the aircraft
manufacturers.
The Managing Director of GTBank Plc, Mr.
Segun Agbaje, had said most of the commercial banks in the country
would prefer to finance private jets to regular commercial jet sector.
He said, “Risks and problems associated
with commercial aviation is one of the problems confronting the sector.
However, most financial institutions will prefer to support business
aviation (private jets) at the expense of commercial aviation. Business
aviation has less risk when compared to commercial aviation.”
Agbaje, who spoke at the Nigerian
Business Aviation Conference on the theme ‘The Emerging Market in
Business Aviation,’ listed some of the popular jets among Nigerians
billionaires in the country as Gulfstream, Bombardier, Global Express,
Hawker Legacy and Dassault Falcon.
Agbaje put the total value of private
jets in the country at $3.75bn, adding that each of the estimated total
of 150 jets in the country cost $25m on the average.
He said the total number of private jets in the country had made Nigeria the continent’s largest market for private jets.
Most of the jets, according to Agbaje, are imported from the US, Canada, Europe, Brazil and South Africa.
The GTB CEO, however, said banks had yet
to invest in the aviation industry because of attendant risks involved
in commercial aviation.
He was optimistic that with the involvement of financial institutions, the sector would record a boost.
Agbaje mentioned cash, direct lending
and leasing as some of the means through which Nigerian private jet
owners had acquired their airplanes.
According to him, cash acquisition of
aircraft amounted to 70 per cent, leasing 14 per cent while direct
lending was 16 per cent.
He added, “Aircraft financing is a way
to deepen banking relationship with top private banking customers and
corporate organisations, but there are some challenges in the financial
institutions as most of us don’t realise; hence the importance of
support for the industry. Nigeria provides a huge opportunity for
development in aircraft manufacturing industry.”
Industry expert and President,
Association of Foreign Airlines and Representatives in Nigeria, Mr.
Kingsley Nwokoma, said some banks had extended offers to finance
business jets.
He, however, said banks needed to
reconsider financing the operations of domestic airlines, even if they
would not help to finance their aircraft acquisition.
He said, “I have personally seen moves
by banks to finance private jet acquisition. But what I have to say is
that most people cannot benefit from private jet acquisition. Most
people board commercial planes and it is a known secret today that
domestic airlines are in crisis. The banks need to take a second look
and consider financing the local carriers again.”
However, an industry analyst and Head of
Research, Zenith Travels, Mr. Olumide Ohunayo, said, “It is interest
and profit that drive the banks and other financial institutions.
“The freedom and fickle regulations in
the general aviation make it a profitable venture. Part of the new
policy that deepens local content will help but it’s unfair to give
private jet owners waivers on spares and others. It is a luxury business
that needs to be taxed.”
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