Banks dump airlines for private jet owners

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.”