Commercial aviation sector becomes focus for new NBAD fund

On Sunday, an agreement was signed by the National Bank of Abu Dhabi (NBAD) with Germany's DVB Bank with the aim of building an investment fund targeting the commercial aviation sector.

The fund, which will become operational by the year end, would work to increase $1 billion (Dh3.7 billion) in capital to finance the purchase of aircraft and engines to be leased to commercial airlines selected by the fund.

Shiraz Habib, head of product development at NBAD's Investment Banking Group said that the fund would most probably find new and existing assets on lease to particular airlines, both from within the region and globally.

Habib said: "We plan to follow an operating lease model that is growing in prominence globally and which grants more flexibility to aircraft operators. Airlines sometimes have assets on their books which they may not want to retain as they may seek to optimise their balance sheets. This gives us the opportunity to buy high-quality assets and lease them to the airlines."

As per the figures from NBAD's Investor Relations Department, in the year 2008, NBAD transportation sector loans touched Dh6.36 billion, or around 6% of the bank's total loans and advances, for the first half of this year.

As per an NBAD statement, the partnering banks and investors will finance the fund equally, mainly from the UAE and other Gulf Cooperation Council countries.

The fund is the first of its type for a UAE bank. Since its establishment in 1923 NBAD's partner, DVB Bank has specialized in financing the transportation sector.