Islamic, Bahrain-based Ibdar Bank has concluding a $100m deal with Ethiopian Airlines involving the acquisition and lease of four Bombardier Q400 Next Gen aircraft to the airline as part of a structured 12-year agreement for which bank has already received its first dividend.
Under the terms of the deal, which was structured in a joint venture with Dubai-based operating lessor Palma Holding, Ibdar contributed $22m of the total while the Export Credit Agency of Canada provided $78m. Meanwhile, the airline paid an initial dividend of 2.5%.
“The deal was the first Sharia-compliant transaction in Africa’s aviation sector,” noted Basel Al Haj-Issa, CEO of Ibdar Bank. “The first aircraft was delivered on 19th June; the fourth on 29th August. While the deal expires in 2026, it also includes options for another four aircraft.”
The bank will be offering select investors the opportunity to acquire an indirect stake in the next four aircraft, the CEO said, at a potential return of 10% of the cash value annually.
In addition to aircraft buying and leasing, which the bank sees as a strong sector, it is also looking at spares and engines in aviation and there are internal discussions on the subject.
Tewolde Gebremariam, CEO of Ethiopian Airlines, has been vocal about the need for African airlines to aggressively push back against Gulf and other foreign carriers in its markets.
“This opportunity comes at a time when Ethiopian Airlines, an award-winning African airline with strong financial and operating track record, is embarking on an ambitious fleet expansion programme amid strong growth in African air travel,” concurred Al Haj-Issa.
He added that Ibdar was focused on originating innovative transactions, and noted: “We have a strong pipeline of opportunities in other sectors where we intend to build on growth in consumer patterns and in industries where we have know-how to deliver solid returns.”
Ibdar’s concluded its first aircraft leasing transaction with Emirates Airline in 2011, when the bank acquired a single Boeing 777-200ER and leased it to the airline for a fixed six-year term.
In additional comments on the situation in Africa, Al-Haj-Issa said Ethiopia was among the most stable of the countries, with a population of 100 million and vast untapped resources. Of Africa in general he noted that taking the long view, then the returns appeared very good.