Denton Wilde Sapte, Linklaters and Hassan Radhi & Associates have advised on Gulf Air’s US$70m loan to partly finance eight new aircraft. This is another deal that signals the upturn in regional aviation deals.

The Bahraini national airline turned to a team of Linklaters lawyers, led by co-head of the firm’s transport and logistics sector, Robert Fugard. He was assisted by Darren Sumich, Kirsty Naylor and Sanam Majid to provide advice on the four year, medium-term ijara (loan) facility funding the acquisition of eight new Airbus A320s (pictured). Local firm Hassan Radhi and Associates also provided advice to Gulf Air.  Bahrain Islamic Bank provided finance, turning to Denton Wilde Sapte’s Abu Dhabi-based lawyers, Paul Jarvis and Sami Syadi, to structure the loan.

The transaction is significant as it is another sign of the recovery of the aviation sector, which has been affected by rising fuel prices since the economic crisis hit. A number of Middle Eastern airlines have been buying up big, such as Etihad’s US$7bn order of new engines and Gulf Air’s US$1.5bn order of Rolls Royce engines. Recently, the budget carrier flydubai organised a US$320m loan for new Boeing aircraft.

The Gulf Air deal also signals the growing popularity among aviation clients in using Islamic financing arrangements to structure loans. According to Denton’s Jarvis, Islamic finance has become an accepted alternative. “This should not come as a surprise because leasing is a well understood financing technique in the aviation industry,” he said. “Given that most aviation Islamic finance structures are based around an Islamic lease (ijara), the transition for airlines from conventional finance into Islamic finance is relatively painless.”