Africa Rising: Why the business aviation industry needs to care about Africa. Melanie Humphries February 2013

Transcription

1 Africa Rising: Why the business aviation industry needs to care about Africa Melanie Humphries February 2013

2 Overview What s happening Globally? What s happening in our world? The importance of Business Jets in Africa Financing Options Availability Current trends Future Outlook Financing Solutions & Structures Q&A 2

3 What s happening Globally? Optimism over global economic recovery remains subdued Eurozone- Cloudy Skies?... UK remains in recession A gradual depreciation of the Euro during 2013 is expected General containment of major Eurozone tensions The exit of Greece appears unlikely in 2013 German elections coming up in September Chinese economy expected to show firmer growth in 2013 US recovery continuing The penetration rate of business Jets by region is highly variable; each region is at a different stage Bombardier Business Aircraft Market Forecast

4 Why do we care about what s happening Globally? What happens in the Eurozone dampens global sentiment Some International Banks are contracting their USD lending books GDP growth drives Air traffic growth (effect on the Business Jet market?) Eurozone is a major African trade partner African Inter-continental traffic is largely driven by Europe, with 60% of total seats from/to Africa - Airbus 4

5 What s happening in our world? Africa the hopeless continent and other bad news The Economist May

6 What s happening in our world? Does perception become Africa s reality? 6

7 What s happening in our world? Africa Rising and all the good news The Economist December

8 The Importance of Business Jets in Africa... Business Jets take to the skies 8

9 The Importance of Business Jets in Africa... Historic growth in context and what the future holds Africa and Asia pacific (both emerging market economies) remained more resilient in their growth through the 2008 to 2010 period. Upwards trend for worldwide business jet sales Africa will experience growth in the number of aircraft of just under 50% over the next 20 years Compared to a decline in Europe Nr. of Aircraft by Region % % North America % % Europe % % China % % Latin America % % Russia & CIS 525 5% % Middle East 410 4% 775 6% India 385 4% 960 7% Asia Pacific 370 4% 615 5% Africa 325 3% 485 4% 9,800 13,280 (Source: Bombardier Business Aircraft Market Forecast ) 9

10 The Importance of Business Jets in Africa... GDP growth drives demand for Aircraft Sub-Saharan Africa has so far maintained strong growth in the face of a hesitant world recovery IMF Africa is the third fastest growing region out surpassed only by Emerging Asia and the Middle East. Many African nations have breached the 5% GDP growth barrier - led by mining and minerals, oil and gas, other natural resources, tourism, agriculture, technology, manufacturing and more 10 of top 20 fastest growing economies are in Africa. 10

11 The Importance of Business Jets in Africa... It s a Business tool, not just a luxury Relatively slow infrastructure development to date in respect of road and rail transport - air travel still preferred mode of transport for passengers and cargo Access to places with little or no airline service Reaching multiple destinations quickly and efficiently Scheduling predictability Increasing traveller productivity, safety and security en route Almost 1 billion of world population are Africans 11

12 Financing Options Availability onwards Pre-Delivery Payment Finance Operating Leases Finance Leases and Bank Debt Fractional Ownership Airframe & Engine manufacturer support Residual Value Products ECA 12

13 Financing Options Current Trends Appetite for PDP finance remains limited Limited manufacturer support Emergence of regional and local banks as financiers of business aircraft Limited availability of non-recourse asset based funding, strong counterparty very important Use of political risk insurance to mitigate jurisdictional risk 13

14 Future Outlook Increase in availability of funding for business aircraft? Involvement of Asian Banks? Not a one size fits all approach tailored structuring can overcome some of the challenges in certain jurisdictions Expansion of relationship banking concept Understanding the jurisdiction and getting to know the client and his business, cross selling of other banking products Financial engineering becoming a necessity rather than a nicety Involvement of development banks, regional and local banks Integrated, holistic funding solutions ECA finance 14

15 Financing Solutions & Structures Key elements that make a deal work Strong sponsor cash flow and balance sheet Quality of Financial and other information Flexibility initial parameters, restructure Implementation and Structuring Costs, taxation implications Regulatory friendly jurisdictions for Sponsor Aircraft Registration SPV Operator Perfection of security Reliance on Asset Robust valuation methodology Maintenance and maintenance records to help sustain asset value Insurance - Political - Total loss - Third party liability Matched funding - USD Asset vs USD Funding, Local currency liquidity? Tripartite relationship between the operator, owner and financier (Co-ordination Agreement) 15

16 Financing Solutions & Structures Example: Typical Finance lease structure Client Jurisdiction: Africa Recourse / Guarantee Equity Lease agreement Aircraft Agent/manufacturer Acquire the aircraft SPC Jurisdiction: Mauritius, BVI, Jersey etc. Loan Lender Operating & Service Agreement Operator 16

17 Financing Solutions & Structures Example: Standard Security Package A guarantee from the Sponsor First priority mortgage bond Pledge of the shares in the SPC Subordination & Cession of all the shareholder loans in the SPC Tripartite/Co-ordination Agreement Security Assignment(s) over: Insurances Maintenance and Operating Agreement(s) Lease/Charter, if any Engine and Airframe Warranties (on newer aircraft) Purchase Agreement (on new Aircraft) 17

18 Financing Solutions & Structures Standard information requirements Financial Information: Most recent management accounts Historic audited financials over a three year period General Business Information: Ownership structure and shareholder details A brief business history Company profile, legal registration and operation Business model/strategy (historically and going forward) Management team details Aircraft/Operations related: Motive for purchase of the aircraft and intended use (private only, charter etc.) Aircraft details (type, year of build, maintenance status etc.) The intended operator 18

19 Q & A 19

20 About Investec Aviation Finance Recognised as a leading global aviation bank, over 240 aircraft financed to date Investec was awarded the Regional Aircraft Finance Deal of the Year Award by Euromoney (2011) & Corporate Jet Investor African Financier of the Year Award (2012) Extensive experience in financing both new and pre-owned aircraft for commercial airlines, leasing companies, corporates and individuals 25 dedicated aircraft finance professionals in the Global team, with experience in banking, airline management, leasing companies, aeronautical engineering, law and accountancy Professionals based in London, Johannesburg, Ireland and Sydney 20

21 Thank You Thank You Investec Capital Markets, a division of Investec Bank Limited. Reg No1969/004763/06. An authorised financial services and registered credit provider. A member of the Investec Group.