RWANDAIR BORROWS $160M FROM PTA BANK TO BUY AIRBUS AIRCRAFT

RwandAir’s aeroplanes at Kigali International Airport. The airline has borrowed $160 million more from PTA Bank to acquire two aircraft even as it looks to offload 30 per cent of its shares to a strategic investor.

RwandAir has borrowed $160 million more from PTA Bank (the Eastern and Southern African Trade and Development Bank) to acquire two aircraft even as it looks to offload 30 per cent of its shares to a strategic investor.

The airline has reached an agreement with PTA Bank to increase its fleet to eight. The new aircraft, to be delivered from July next year, are one Airbus A330-200 and an A330-300 — both fitted with Rolls-Royce Trent 772B engines.

RwandAir is already servicing a loan of $60 million borrowed from PTA Bank in 2011 and due for maturity in 2021.

READ: RwandAir orders new planes, joins scramble for African skies

“Everything we do is designed to make the airline stronger and more efficient,” said John Mirenge, the chief executive officer of RwandAir.

However, the government could be forced to borrow more to support the carrier’s expansion plans because the aircraft are worth $500 million.

The government has in the past borrowed heavily to finance the operations of the airline on top of other subsidies in the hope that it will break even by 2018.

For instance, in 2013, when Rwanda raised $400 million from its debut 10-year Eurobond, $200 million was meant to repay loans for the Kigali Convention Centre and to finance RwandAir. It is not clear how much of the money went to the airline.

READ: How has Rwanda spent $400m Eurobond cash it got last year?

In the revised budget for 2013/2014, the allocation to RwandAir was increased from Rwf22 billion ($32.3 million) to Rwf29 billion ($42.7 million). The spending on the airline went up further to Rwf32.5 billion ($47.9 million) as more money was committed to repay loans for the airline.

RwandAir plans to grow its regional network this year as it expands its single-aisle fleet from seven to nine aircraft, ahead of the anticipated launch of operations of the Boeing 787 in 2017.

Over the next three years, the loss-making airline plans to add wide body aircraft; launch long-haul services and increase its destinations from 18 to 25
The new A330 will be deployed on long-haul destinations throughout Western Europe, the Middle East and Asia.

“We will use the first aircraft, which will get here next year, to increase capacity to Dubai to clear the backlog. We are targeting Western Europe — the UK, Germany, France — which is where the bulk of tourists into the country come from other than the USA,” Mr Mirenge said.

RwandAir faces stiff competition from regional airlines Kenya Airways, Ethiopian Airlines as well as low budget airline flyDubai.

“The airline business in Africa is not very profitable and in most cases relies on subsidies from governments. RwandAir could grow its profits if we boost the country’s exports,” said Mr Mirenge.

RwandAir recently stopped its Kigali-Mwanza flights due to lack of passengers and cargo. In a bid to increase efficiency, Mr Mirenge said negotiations had been held with strategic investors, including Ethiopian Airlines, about offloading a 30 per cent stake in RwandAir.

READ: RwandAir cancels flights on Mwanza-Kigali route

“We have talked to Ethiopia and many other strategic partners. Working with a partner with a large network like that of Ethiopian Airlines could improve our efficiency,” said Mr Mirenge.

The East African