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KQ signs Sh160bn fleet expansion financing deal with Afreximbank

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NAIROBI, Kenya:  June 25 (Xinhua) — The African Export-Import Bank (Afreximbank) and Kenya Airways on Monday signed a $1.9 billion (Sh160 billion) financing agreement aimed at increasing the size of the airlines’ fleet.

Kenya Airways CEO Titus Naikuni said that 1.6 billion dollars will be used for aircraft delivery finance while 300 million dollars will be used for per-delivery payments. “The Afreximbank’s credit facility of 1.9 billion dollars to Kenya airways will assist the carrier to acquire additional aircraft as part of plans to expand its fleet from the current 34 to 119 by 2021,” Naikuni told journalists after signing the deal in Nairobi.

He said that the financing mandate was awarded to the pan African bank following an assessment of several financing bids received from the March request for proposals. Kenya Airways said that the funds will be used to buy 10 new Boeing aircrafts and a similar number from Brazilian aircraft firm, Embraer.

“The Embraer are scheduled to be delivered during the third quarter of this year, while the deliveries of the Boeing will commence from the beginning of the first quarter of 2013.”

Naikuni said that airline plans to increase its destinations from the current 57 to 115 by 2021.

“Our aim is to increase our destinations in India to 5 while those in China to 6 in order to cater for growing Kenyan trade with the Asian nations,” the CEO said.

Naikuni noted that the strategy for its Africa routes is to increase the frequency of flights in view of increased economic growth in the continent. Afreximbank President Jean-Louis Ekra said that the financing of the expansion of the fleet will assist the growth of intra- African trade.

According to Afreximbank, total African trade is approximately 1 trillion dollars and will double by the end of 2016.

“However intra-Africa trade accounts for only ten percent of overall trade by Africa nations largely due to inadequate cross border networks,” the president said.

“Air transport will therefore be the engine to sustain intra- Africa trade given Africa’s poor rail and road network,” he said.

Afreximbank said that it has also initiated talks with the Kenya Civil Aviation Authority to finance the expansion of airports in Kenya.

“We will work together to ensure that Nairobi’s Jomo Kenyatta International Airport becomes one of the leading air transport hubs in Africa,” he said. “The negotiations forms part of the bank’s vision to modernize the aviation sector in Kenya which is key to cross border trade,” Ekra said.

He said that the bank is planning to leverage its partnership with Brazilian Development Bank and the United States Import Export Bank in order to deliver financial solutions to Africa’s transport infrastructure.

Kenya Airways Finance Director Alex Mbugua said that the loan for 300 million dollars will be repaid in 7 years while the 1.6 billion dollars has a repayment period of 10 years.

He added that the proceeds will be used to augment the 173 million dollars received from the rights issue in order to purchase new planes which will be used for replacement of old fleet that are due for retirement.

“The deal represents the last lap in financing efforts to enable Kenya airways complete fleet upgrade programme,” he said. The finance director said that the Embraer aircraft will be used for increasing frequency on African and other regional routes while the Boeing will be used for long haul routes including Europe and Asia.

“The first Embraer will arrive in August and thereafter one will be delivered every month for the next seven months,” Mbugua added.

The financial package consists of a pre-delivery payments (PDPs) facility and an aircraft delivery finance facility to fund the delivery of the B787s, B777-300ER and the E190s.

The E190s are scheduled to be delivered during the 3rd quarter of 2012, whilst the B787 and B777-300ER deliveries are expected to commence during the 1st quarter of 2014 and the 4th quarter in 2014, respectively. (Xinhua)

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LUKE MULUNDA
LUKE MULUNDAhttp://Businesstoday.co.ke
Managing Editor, BUSINESS TODAY. Email: [email protected]. ke
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