27048 - AKFED Aviation

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Summary of Proposed Investment

Project Number

27048

Company Name

Aga Khan Fund for Economic Development SA

Date SPI Disclosed

Feb 18, 2010

Country

Africa Region

Industry

Infrastructure

Projected Board Date

Mar 22, 2010

Status

Completed

Sector

Air Transportation

Department

Regional Industry - INF Africa

Environmental Category

B - Limited

Previous Events

Approved : Mar 31, 2010
Signed : Mar 31, 2010
Invested : Jun 10, 2010

Project Description

The Aga Khan Fund for Economic Development (“AKFED”), through its Aviation Services division (the “Division”), is currently expanding its activities in both East and West Africa. The aim of the Division is to assist in maintaining the critical aviation infrastructure in support of economic development and to provide much needed regional airline services in Africa. The Project would consist of a corporate loan of up to $25 million to AKFED for on-lending to its three airlines: Air Burkina, Air Mali and Air Uganda, to allow AKFED to consolidate all of the Division’s airline and aviation activities and optimize routing, synergies and overall effectiveness across the group’s airline operations.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	25.0
Equity

Development Impact

Africa suffers from significant investments deficits in infrastructure (transport, power, and utility) that are hampering the region’s ability to grow, compete, and reduce poverty. These infrastructure needs are expected to become even more significant in the context of further regional economic growth. Private sector involvement is required in order to address the infrastructure challenge and to assist in maintaining critical aviation infrastructure.

Safe, efficient, good quality and affordable airline service is vital to Africa, given the substantial distances between urban centers, and inadequate rail and road infrastructure. Once fully operational, the Division’s aviation activities will be an important part of Africa’s aviation infrastructure, providing essential, safe, reliable commercially scheduled air transport services in the region. Moreover, the Division’s wide network and coverage of cities throughout East and West Africa will further enhance access to remote areas, thereby aiding in their economic development.

The proposed Project is expected to promote inter-regional and international trade in the region. Additionally, the Project is also expected to provide a boost to tourism. Continued trade and economic growth in Africa is contingent on further investments and improvements in regional transport infrastructure and services. The Division’s operation will fill the service gap that exists today and will result in increased frequencies for existing destinations as well as the addition of new destinations, better passenger service and improved efficiency and safety. Such improvements will increase the connectivity, competitiveness and attractiveness of these countries’ economies. Moreover, the proposed Project will support regional integration by assisting the development and expansion of a group of regional airlines.

The additionality provided by IFC’s proposed investment will be in the form of:

-Longer-term financing including longer tenor and longer grace period tailored to meet the Project’s cash flow needs;
-Provision of airline industry and technical expertise to support the Division in regards to its operations and business strategy, thereby increasing the likelihood of success of a new regional airline alliance; and
-Guidance on environmental and social sustainability standards and monitoring of compliance by IFC, which will improve Project sustainability in a manner not contributed by any other investor.

IFC’s support is expected to help the Division undertake its consolidation and future expansion programs, supporting a group of well-run, safe, efficient airlines that are playing an important role in promoting regional traffic flows within Africa.

The Project is categorized as B given the investment consists of expansion and refurbishment of aviation fleet and funding of working capital and start up costs. Thus the environmental and social risks are readily manageable through implementation of mitigation measures, and there are limited potential impacts which are largely avoidable and reversible. Key issues include (i) aircraft operation and safety, including a robust training program; (ii) aircraft maintenance and servicing, including handling and management of hazardous material and waste; (iii) environmental protection at ground site; (iv) aircraft noise and emissions controls; (v) employees occupational health and safety and fair working conditions; and (vi) consumer health and hygiene conditions.

Contacts

For Inquiries About the Project, Contact

Mr Thierry Lombard
AKFED Aviation Financial Director
Aiglemont
60270 Gouvieux, France
Tel : +33 (0) 3 44 58 40 00
Fax : +33 (0) 3 44 57 97 17

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Washington DC 20433
Telephone: 202-473-3800
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Local Access of Project Documentation

Air Uganda:
Mr Hugh Fraser
CEO
Plot 11/13, Lower Kololo Terrace
P.O.Box 36591, Kampala, Uganda.
Tel: +256 414258 262/4
Fax: +256 414 500 932
Email: info@air-uganda.com

Air Burkina:
Mr Mohamed Ghelala
CEO
29, Av. de la Nation
Immeuble Air Burkina
01 BP 1459 Ouagadougou 01
Tél. (226) 50 49 23 23 / 50 49 23 65 / 50 49 23 70
Fax (226) 50 31 45 17/ 50 31 31 65
E-mail: resa@airburkina.bf

Air Mali:
Mr Abderahmane Berthé
CEO
Siège et Agence Centre villeImmeuble TOMOTA – Avenue Cheick Zayed,
BPE 2286, Hamdallaye, Bamako, Mali
Tél. +(223) 20 22 24 24 / 20 22 26 26
Fax : +(223) 222 71 11 / 20 29 56 00
Email : info@air-mali.com

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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