Gerald Butt / NICOSIA
Middle-Eastern businessmen intend to run the company in accordance with Islamic law
A new aircraft leasing company conforming to Islamic (Sharia) law is to be established before the end of this year - the first venture of its kind in the Middle East.
A group of Saudi Arabian businessmen are seeking to raise $200 million from investors (with a minimum share value of $1 million) by early September for the creation of the Islamic Aircraft Leasing Company (IALC), which intends to build a portfolio of 15-20 aircraft over 12 months. Bahrain-based Gulf Investment Bank (GIB) and Ernst & Young in Bahrain are offering the new Islamic investment opportunity.
IALC's aircraft portfolios will be built and managed by Novus Management and Consulting of Geneva. Novus says IALC is set to acquire "new and used aircraft, with the emphasis on the latter. They will be primarily commercial airliners, although other aircraft will not be excluded. All will be Stage 3 and new generation aircraft".
The approved aircraft comprise all the Airbus types as well as Boeing 737s, 747 freighters, 777s, and the MD-80/90 series. Novus says IALC will be "looking for opportunities to buy aircraft from manufacturers, airlines or other lessors/leasing companies on arms' length commercial terms. Acquisition could be done in single or multiple unit transactions. No purchase on a speculative basis - without a readily available lease - is contemplated."
According to Novus, it is not concerned that IALC is being set up at a time when airlines are facing economic difficulties because of rising operating costs and the global recession. "No matter what impact the overall economic activity has (or will have) over aircraft values, we believe that the leasing activity will witness a constant growth over the next decade as more and more airlines are resorting to this financing method as a means to manage their balance sheet and obtain fleet flexibility," it says.
While IALC will be run according to Sharia law to attract investors from Islamic countries, GIB says that the company will lease aircraft to any airline in the world "considered to be creditworthy". The concept of leasing is particularly compatible with Sharia principles in that it avoids payment of interest, forbidden under Islamic law, and involves instead a fee for the use of the lenders' assets.
Source: Flight International
