Nauru Airlines borrows $15 million to acquire second B737-800

By Andrew Curran.

Nauru Airlines is set to receive its second passenger-configured B737-800 after the carrier inked a USD15 million loan agreement with the Asian Development Bank (ADB) last week.

The loan will finance the acquisition of a former Virgin Australia aircraft registered as VH-YVC (msn 40997). The 14-year-old jet operated for Virgin Australia until mid-July, when it ferried to Kuala Lumpur (KUL) where it presently remains. As with other Nauru Airlines aircraft, it will retain an Australian registration.

The financing package includes an AUD5 million loan from ADB’s ordinary capital resources, a USD5 million concessional loan from the Leading Asia’s Private Infrastructure Fund 2 (LEAP 2), and a reimbursable grant of up to USD5 million from the Private Sector Window of the Asian Development Fund.

Nauru 40997 Leasing Corporation, a wholly owned subsidiary of Nauru Air Corporation, was the special purpose vehicle used to acquire the aircraft. Nauru Airlines is wholly owned by the Government of Naoero.

At the time of publication, Australian Civil Aviation Safety Authority records still name Virgin Australia Airlines Pty Ltd as the registered operator of the aircraft and SMBC Aviation Capital (UK) Limited as the registration holder.

Fresh B737-800 to replace older Nauru Airlines aircraft

Nauru Airlines operates five aircraft, including a passenger-configured B737-800, a passenger-configured B737-700, a passenger-configured B737-300 and two B737-300 freighters. A sixth aircraft, a B737-800 freighter, is on long-term lease to India’s Afcom Cargo.

According to the bank, VH-YVC will be used to replace an ageing aircraft, helping improve fuel efficiency and service reliability while reducing maintenance costs and boosting passenger capacity. All three passenger-configured Nauru Airlines aircraft are over 20 years old. The two B737-300s are 20.7 and 26.8-years-old while the existing B737-800 is 23.4 years old.

Aero South Pacific has approached Nauru Airlines for comment.

Emma Veve, the ADB’s Pacific Department Director General, said the financing package blended the right mix of commercial and concessional finance to de-risk private investment in smaller and more challenging Pacific markets.

“The ADB is open for business and committed to working with Pacific businesses and investors to develop and finance more opportunities,” she said.

Photo: Nauru Airlines.
Contact the writer: andrew@aerosouthpacific.com