The aviation industry currently faces low economic growth, and the new South African visa requirements, which came into effect last month, are making it more difficult for people to visit the country, Nedbank Corporate & Investment Bank head of aircraft finance James Geldenhuys tells Engineering News.
South Africa’s new immigration measures require adults travelling with children to carry unabridged birth certificates for their children, with both parents having to produce an unabridged birth certificate with full details of the parents, as well as a passport and visa for the children.
He adds that, with performance generally down across all financial markets in recent years, investors are seeking alternative avenues to generate good returns, with particular focus on the aircraft leasing market.
“There has been a significant and steady capital flow into the aircraft-leasing market over the past two years,” Geldenhuys notes, adding thatmost of it has been for aircraft orders placed by lessor companies, which are supported by investors seeking opportunities and who are interested in starting commercial aviation businesses.
Aircraft are globally liquid, moveable assets and will continue to play a significant role in the marketplace, with the growth in aircraft leasing as an investment focus potentially delivering particular benefits in Africa, he notes.
“It provides an opportunity for prospective airline African operations with viable business plans to play a role in South Africa and find an
alternative route to the market.”
Geldenhuys comments that aircraft leasing is a relatively low risk for lessors, particularly given the ease with which they can remove their assets from the business concerned if it fails to deliver on the terms of the contract.
“This type of lease transaction can also be a win-win situation in that it effectively enables the establishment of much-needed commercial aviation to drive economic activity in Africa, while giving global investors a low-risk opportunity to participate in and benefit from,” he says.
Open Skies Policy
In a study, titled ‘Open Skies for Africa – Implementing the Yamoussoukro Decision’ (YD) – the YD being a regional agreement intended to fully liberalise intracontinental air services among all African nations who are party to it – Geldenhuys cites the continued restriction of air services over many African countries as one of the key contributing factors to Africa’s apparent inability to capture its fair share of global air traffic.
“Even a cursory glance at the growth in market share of the air-service market by European countries and the US since the adoption of the YD in 1999 appears to confirm this,” he says.
The aim of the YD is primarily to replace bilateral air use agreements with open and transparent airspace access for the benefit of all stakeholders in the air service market, Geldenhuys adds.
“The Open Skies policy is best described as the deregulation of air services and the opening of regional air markets to transnational competition, to which 44 signatory countries have committed, including 12 African countries – Algeria, Angola, Egypt, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Senegal, South Africa, Tunisia and Uganda,” he says
He adds that the policy could potentially create $1.2-billion in economic benefits and create an extra 155 000 jobs in Africa.
Geldenhuys further notes that South Africa’s aviation business model is viable for growth in the local industry and on the continent, with the aviation sector contributing R50.9-billion, or 2.1%, to South Africa’s gross domestic product and supporting 227 000 jobs.
He cites that airlines across Africa need support from their governments to ensure that the respective Civil Aviation Authorities are well run and actively safeguard the required maintenance and oversight carried out on a continuous basis.
“Given some of the conditions of the road infrastructure in Africa, growth opportunities for the aviation sector certainly exist – on condition that the cost can be managed,” he concludes.