African aviation is growing, but expensive financing and blocked revenues are hindering market expansion

African aviation is growing, but expensive capital and blocked revenues are hindering market expansion

The African aviation market is entering a period of strong demand, but that growth is increasingly clearly colliding with financial obstacles that determine how quickly air carriers can renew fleets, introduce new routes and compete with global companies. At the center of the problem are high aircraft financing costs, limited access to more favorable capital, uneven legal protection of creditors and the long-standing problem of blocked funds, or revenues that airlines cannot promptly transfer out of individual countries. According to data from the International Air Transport Association, African aviation already has significant economic weight: it contributes about 75 billion US dollars to GDP and supports 8.1 million jobs, while the market over the next two decades is estimated to grow at an average of 4.1 percent annually. Such figures show that this is not only a question of passenger transport, but of infrastructure that connects trade, tourism, investment, labor and regional integration.

At the same time, the financial reality of many air carriers remains considerably more difficult than the demand projections themselves. The acquisition of a new aircraft or the conclusion of a leasing arrangement for a fleet is a long-term obligation that depends on the confidence of banks, leasing companies, manufacturers and insurers in the legal system of the country in which the carrier operates. When a creditor assesses that, in the event of bankruptcy, non-payment or dispute, it will be difficult and slow to enforce its rights over the aircraft, it builds that risk into the price. The consequence is more expensive financing, higher collateral requirements and a smaller number of available financiers. For carriers in markets with lower credit ratings, this can mean delaying fleet modernization, relying on older and less efficient aircraft or losing opportunities on routes where demand is recovering and growing quickly.

Blocked funds have become one of the most visible symptoms of the crisis of confidence

A particularly sensitive issue for international airlines is blocked funds. These are revenues generated by the sale of tickets and services in local markets, which companies then cannot convert into convertible currency or repatriate in accordance with international rules and bilateral agreements. In July 2025, IATA stated that about one billion US dollars of airline revenues were blocked in 26 African countries, which accounted for 73 percent of total blocked funds worldwide. The organization warns that, in such circumstances, companies often reduce flight frequencies or completely suspend certain routes, because they cannot maintain operations in a market from which they cannot collect their own revenues in the manner needed to cover the costs of fuel, maintenance, leasing, insurance and other obligations that are mostly denominated in US dollars.

The problem of blocked revenues is not only an accounting inconvenience for airlines. It directly affects the perception of risk for the entire market. If a carrier cannot freely dispose of its revenues, it is less willing to open new routes, increase capacity or offer more competitive prices. If foreign carriers reduce their presence, connectivity between cities declines, and local economies lose part of their access to tourists, business travelers, cargo flows and investors. In aviation, the network effect is crucial: one canceled route does not mean only fewer seats on a given connection, but weaker connectivity to hubs, fewer transfer options and less predictability for companies that depend on the rapid movement of people and goods.

Why the Cape Town Convention is important for aircraft financing

In this context, the Cape Town Convention, together with the Protocol on Matters Specific to Aircraft Equipment, is increasingly mentioned as one of the most important legal instruments for reducing risk in aircraft financing and leasing. The Convention was concluded in Cape Town on 16 November 2001, under the auspices of ICAO and UNIDROIT, and its purpose is to create a predictable international framework for rights over high-value mobile equipment, including aircraft airframes, engines and helicopters. The fundamental problem the Convention seeks to solve is the fact that aircraft constantly cross borders, while national laws regulate security interests, retention of title, leasing and procedures in the event of default differently. For financiers, this creates legal uncertainty, and uncertainty ultimately turns into higher interest, more expensive leasing or rejection of the transaction.

The mechanism of the Convention rests on the recognition of an international interest, an electronic international registry and clearer rights of creditors in the event of the debtor's default or insolvency. In other words, the goal is not to favor one side of the contract, but to create a system in which all parties know in advance how rights over assets worth tens or hundreds of millions of dollars are protected. ICAO states that the Convention and the Protocol reduce risk for creditors and consequently borrowing costs for debtors, precisely because they increase legal certainty. For carriers, this is particularly important because more modern aircraft usually bring lower fuel consumption, lower emissions per seat and a more reliable operational schedule, but they are difficult to obtain without long-term capital.

Ratification is not enough if the rules are not applied in practice

Expert organizations that monitor the implementation of the Cape Town Convention emphasize that ratification itself is not the end of the process. For the legal framework to produce an economic effect, its provisions must have force in domestic law and must prevail over contradictory rules that could, in a dispute, slow down the return of aircraft, the export of equipment or the enforcement of registered rights. The Aviation Working Group points out that the full benefits depend on qualifying declarations, actual application before courts and administrative bodies, and the alignment of national procedures with international obligations. For financiers, what is crucial is not only what is written in the ratification document, but whether, in a crisis scenario, they will be able to quickly, legally and predictably protect their property.

This is crucial for African markets where the ambition for growth often collides with the perception of legal and currency risk. If a state establishes a system in which creditors' rights are respected, procedures take less time and rules are aligned with international standards, air carriers can gain access to a wider circle of leasing companies and banks. If such a system is not implemented, the market remains more expensive than its actual commercial prospects. In practice, this means that two airlines with comparable growth plans may pay different prices for capital not because one has fewer passengers, but because it operates in a legal environment that financiers consider riskier.

Growth in demand requires fleets that can be financed, not only ambitious plans

Long-term forecasts further increase the pressure on the issue of financing. In its forecast for Africa published in 2025, Boeing estimated that passenger air traffic on the continent will grow on average by about six percent annually through 2044 and that the commercial fleet will more than double, to approximately 1,680 aircraft. Such a scenario implies large investments in new single-aisle aircraft for regional and medium-haul routes, but also in widebody capacity, maintenance, pilot and technical staff training, airports, navigation systems and digital infrastructure. Airbus, in its global market forecasts, also emphasizes the importance of the new generation of aircraft, which can achieve up to 25 percent better fuel consumption and lower carbon dioxide emissions compared with previous generations.

But demand forecasts do not buy aircraft by themselves. They are the basis of the business case, but capital comes only when risks can be understood and contractually protected. African carriers therefore find themselves between two pressures: on the one hand, the market demands more seats, better connectivity and more reliable schedules; on the other hand, global capital is becoming increasingly sensitive to legal certainty, currency stability, transparency and contract enforcement. In such an environment, the Cape Town Convention does not eliminate all problems, but it can reduce one of the most expensive elements of risk: uncertainty over rights to aviation assets.

High taxes, safety standards and regional connectivity are part of the same equation

Fleet financing is not the only challenge. In the same set of priorities for Africa, IATA also warned about safety standards, taxes and charges. According to that organization, the implementation of ICAO standards and recommended practices in 46 of 48 sub-Saharan countries is on average lower than the global average, while taxes and charges on air transport in Africa are about 15 percent higher than the world average. Such costs reduce demand, especially on price-sensitive routes, while weaker implementation of standards affects the confidence of passengers, regulators and partners. In a market where capital is already expensive, additional tax burdens and regulatory weaknesses can offset part of the benefits that rising demand would bring.

The broader picture also includes the Single African Air Transport Market, an African Union initiative to create a single African air transport market. The idea is to increase interregional connectivity, remove some restrictions from bilateral regimes and enable greater competition. According to AFCAC data, 38 states have currently joined the solemn commitment of SAATM. Nevertheless, the implementation of such initiatives in aviation usually advances more slowly than political declarations, because states seek to protect national carriers, manage safety issues and retain control over market access. Without route liberalization and without more favorable financing, growth remains fragmented: individual hubs advance, while a large part of the continent continues to depend on expensive transfers, insufficient flight frequency and limited competition.

Fleet modernization also has a climate dimension

Access to capital is also important because of the aviation industry's climate commitments. More modern aircraft reduce fuel consumption, and fuel is one of the largest costs of any airline. When carriers cannot finance fleet renewal, they remain tied to older models for longer, which increases operating costs and makes it harder to align with the expectations of customers, regulators and investors. ICAO, on its pages about the Cape Town Convention, explicitly links lower financing costs with the possibility of acquiring more modern and more efficient aircraft. This does not mean that the legal framework by itself solves aviation decarbonization, but it can remove some of the obstacles that make it harder for carriers to transition to more efficient equipment.

For African carriers, this dimension is especially important because they have to compete with large global groups that have stronger balance sheets, deeper access to capital markets and larger orders with manufacturers. If local companies pay a higher price for capital, while at the same time facing blocked revenues and high charges, their possibilities for investing in a more efficient fleet become limited. This creates a vicious circle: more expensive financing maintains an older fleet, the older fleet increases costs, and higher costs reduce the company's ability to improve its financial profile and attract more favorable terms.

Legal certainty as a precondition for competitive skies

The Cape Town Convention should therefore be viewed as part of a broader air transport policy, not as a narrow legal issue intended only for banks and leasing houses. If the legal system is predictable, financing becomes more accessible; if financing is more accessible, carriers can modernize fleets more easily; if fleets are more modern, networks can be more reliable, costs lower, and the market more attractive to passengers and investors. Conversely, if revenues are blocked, contracts are enforced slowly and taxes increase ticket prices, aviation growth remains below its potential despite demographic and economic trends that work in its favor.

African aviation therefore faces a choice that goes beyond individual airlines. Demand exists, forecasts are strong, and the economic benefit of better connectivity can be great. But without removing financial and legal obstacles, growth will continue unevenly, with strong hubs and more weakly connected markets. Successful implementation of the Cape Town Convention, the release of blocked funds, a reasonable policy on taxes and charges and faster liberalization of the regional market can turn the current potential into a concrete network of flights, jobs and investments. Otherwise, the African sky could remain an example of a market with great demand, but with too little capital to turn that demand into sustainable and competitive air transport.

Sources:

• - IATA – press release on priorities for strengthening aviation's contribution to African growth, including data on GDP, jobs, market growth, taxes, safety and blocked funds (link)
• - ICAO – explanation of the Cape Town Convention and Aircraft Protocol, including purpose, legal certainty and effects on financing costs (link)
• - Aviation Working Group – overview of the Cape Town Convention, its role in the financing and leasing of aviation equipment and the importance of implementation and declarations (link)
• - Boeing – forecast for the African aviation market through 2044, including expected traffic growth and more than doubling of the commercial fleet (link)
• - AFCAC – list of states that have joined the Single African Air Transport Market initiative and context of regional liberalization of air transport (link)
• - Airbus – Global Market Forecast 2025-2044 and data on the efficiency of new-generation aircraft (link)