The African Development Bank (AfDB) is expected on Wednesday to decide the fate of a $296 million financing package for Ivory Coast national airline Air Cote d‘Ivoire’s purchase of five new Airbus A320s, a bank document seen by Reuters showed.
While the Abidjan, Ivory Coast-based lender has participated in loan packages to commercial airlines in the past, some board members have raised questions about the deals and whether the loans fulfil the AfDB’s development vocation.
Air Cote d‘Ivoire, which aspires to become West Africa’s premier airline and make Abidjan a regional travel hub, ordered three A320neos and two A320s last year. Using a stop-gap loan, it took delivery of the first aircraft in July, bringing its total fleet to 10 planes.
“It’s to finance the purchase of the five Airbuses, the training of the crew and mechanics and the maintenance centre,” the company’s General Manager Rene Decurey told Reuters of the loan request.
The size and structure of the package have not been made public, and Decurey declined to confirm the amount.
But according to an AfDB document seen by Reuters, it includes a $60 million sovereign loan from the bank to the Ivorian state, which owns a 65 percent stake in the airline. The bank would also provide $55 million in non-sovereign loans and a $20 million partial risk guarantee.
Specialist bank Investec will contribute $30 million, with other commercial banks providing loans totalling $81.5 million.
Air Cote d‘Ivoire will bring equity of over $50 million to the deal. In addition to the Ivorian state, the airline’s other shareholders are Air France with a 20 percent stake and private Ivorian investor Goldenrod, which holds 15 percent.
The airline, which boasts service to 20 African and five domestic destinations, has previously said the expansion will help grow its business. Its proposal argues that the request is in line with the AfDB’s goals of supporting improved transportation and infrastructure in underserved markets.
The bank has lent to airlines before, most recently contributing nearly $93 million alongside Delta to finance Ethiopian Airlines’ investment plans.
However, Wednesday’s board meeting could prove contentious, Abidjan-based diplomats said.
Some board members have questioned whether financing Air Cote d‘Ivoire’s aircraft acquisition fits with the AfDB’s stated mission of reducing poverty in Africa by spurring “sustainable economic development and social progress”.
Others have been critical of the deal’s unique structure, which would create a special vehicle allowing the Ivorian state to transfer its sovereign loan to the airline with an AfDB guarantee.
The bank’s rotating board of directors is composed of 13 representatives from its 54 African member countries as well as seven from the 27 non-African nations that contribute to its capital.
France, Germany and Spain, whose governments hold stakes in Airbus, currently sit on the AfDB board.