Fiji Airways CEO and managing director Andre Viljoen has cleared the air about Waqavuka Financing Ltd, the Special Purpose Entity (SPE), created to facilitate the purchase of three Airbus A330 aircraft under a $1.06 billion deal in 2013.
Speaking on The Fiji Times online news portal, The Lens @177, he said the company was established by the English, French and German governments as they guaranteed the bank loans that were taken out for the purchase of the aircraft.
Mr Viljoen said the SPE was the norm for all airlines who purchased aircraft through bank loans.
“When we bought these three aircraft, and we financed it with a consortium of German banks, they insisted on ECA (European Credit Agency) guarantees, and the German, the French, and English guaranteed the aircraft,” he said.
“Because they are guaranteeing the banks, the banks have no risk. It all lies with the governments. They then insisted that a company is formed and that the company that is formed holds the title until the last day the aircraft’ last payment is made, and the title comes back to the airline.
“And this company, which we call a special vehicle company, exists for many transactions like this. It’s not the only one, there are many.
“Many airlines have done it, and these special purpose vehicles are registered in Ireland, because it’s a tax haven.”
He said that purchasing an airplane was different from leasing one – as leasing requires monthly rental fee payments, maintenance and at the end of lease tenure, “you hand the aircraft back after meeting certain return conditions”.
“That’s very different to own. When you own, it’s yours and so you’ve got to find a bank or someone to finance 80 per cent on delivery.
“There are very few banks that will do it on their own. They form consortiums.
“What has happened over time, these banks have had airlines fail, and then they sit with an aircraft and it’s difficult to resell it and they lose money.
“So, in order to promote the sales of aircraft, the English, the German, the French, and those governments have formed what they call an export credit agency, where they will guarantee the banks.
“They will look at the credit status of the airline, for a small fee that is paid monthly, that will guarantee those banks.
“We pay the special purpose vehicle, which is owned by the French, German and the English governments, through third parties, holds the title. We pay that, it pays the banks. Now if there was a problem, those governments would complain and, likewise, the banks they paid every month.”
Mr Viljoen said as far as Fiji Airways was concerned, Waqavuka Financing Ltd was a normal financing structure that happened when purchasing aircraft.
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