LONDON – Kigali-based RwandAir is set so sign three aircraft leasing agreements valued at $300 million as part of its network enhancement ambitions into Europe, America, and Asia.
The African carrier has produced a letter to the International Monetary Fund Chief Christine Lagarde asking for a raise in its ceiling for new external debt.
The country of Rwanda revealed that in Q1 2018, the carrier contracted a lease for additional aircraft to expand its fleet, which breached the country’s indicative $500 million ceiling on external debt by public enterprises by $87 million.
Rwanda’s Finance and Economic Planning Minister Uzziel Ndagijimana explained that the rationale behind fleet and route expansion “is to operate deeper into Africa by adding new routes and creating longer haul connections to Europe, America, and Asia.”
Ndagijimana added that even though the airline’s initial plans were to acquire two planes in 2019, “an opportunity arose to acquire new aircraft following the folding of a European airline company, so RwandAir management quickly engaged the lease contracts.”
The Rwandan government believes that the carrier should receive such funding because they are at a place where they can be left to fend for themselves. Government funding has dipped from $56.2 million 205 to $47 million in 2017.
RwandAir’s Financial Health
Even though RwandAir’s revenue has grown, the carrier dipped back into a loss in 2016, posting a $1.01 million loss from an existing operating profit of $2.8 million in 2015.
The carrier’s revenues reached $99.85 million in 2016—climbing from $95.2 million in 2015 and $86.8 million in 2014.
RwandAir believes that through the nod given to them by the IMC, they can head back into profit through the prospect of direct flights to the US from Kigali.
The airline had reduced its losses from $37.3 million in 2014 to $1.01 million last year.
The Rwandan government is hoping the airline will break even by the end of 2019 with the addition of the new planes and routes.
RwandAir currently has a fleet of two Airbus A330s, two Boeing 737-800s, two 737-700s, two Bombardier Q400s, and two CRJ-900s.
RwandAir’s new planes will only start generating debt service payments in 2019, according to the airline.
“Leases for three additional aircraft are likely to be signed in 2018, to replace two aging aircraft. Hence, the government requests an increase in the indicative limit to $800 million to accommodate these leases,” explained Ndagijimana.