Inside ALAFCO: The Sharia Aircraft Leasing Company

It’s not every day we come across an aviation firm that markets itself as compliant in Islamic law. But during the 2020 Kuwait Aviation Show, we had a chance to get to know ALAFCO. The Kuwait-based aircraft leasing company has a respectable list of clients located around the world including Ethiopian Airlines, Garuda Indonesia, IndiGo and several more. Let’s look at ALAFCO and what makes them different from other aircraft lessors.

Inside ALAFCO: The Sharia Aircraft Leasing Company
ALAFCO was an early customer of the Airbus A350. Photo: Airbus

ALAFCO has placed a significantly sizable order of new technology aircraft with Boeing and Airbus, and is set to increase its fleet to more than 100 aircraft by the end of the decade. -Adel Ahmad Albanwan, CEO, ALAFCO

The name ALAFCO comes from “Aviation Lease and Finance Company”. Founded in 1992 by Kuwait Airways Corporation, the company is headquartered in Kuwait but has a respectable international presence.

A Sharia-compliant leasing company

So how does a Sharia (Islamic law) compliant aviation leasing company differ from others? Here are some fundamental values according to law firm Norton Rose Fullbright:

  • No unfair exploitation – Returns on investment should be linked with the profits of the enterprise.
  • No speculation – Speculation or gambling is prohibited.
  • Assumption of some risk by the financier – There can be no guarantee of a fixed return.
  • No uncertainty – Full disclosure is required by both parties to a transaction. Subject matter and price must be known in order to proceed with a transaction.
  • Promotion of trade and enterprise for the benefit of the community.
  • No prohibited investments – Investments in businesses involving certain products such as pork, alcohol or armaments are prohibited.

In terms of leasing, in a Sharia-compliant lease (Ijara) the ownership of the aircraft is not transferred. In fact, the liabilities of the ownership of the aircraft remain with the lessor. Therefore, the lessor rather than the lessee remains responsible for performing major maintenance and structural repair of the aircraft. Furthermore, “if the aircraft suffers a total loss then no further rent is due from the lessee”.

A320neo Air India
Air India has a number of A320neos leased from ALAFCO. Photo: Airbus

Where ALAFCO currently stands

With just over 70 aircraft, the company is rather small when compared to the largest leasing companies. For example, GECAS, the world’s largest aircraft lessor has over 1,200 aircraft in its portfolio.

It’s poised for growth though, waiting for the remainder of its order of 18 Airbus A350-900s. It has also ordered more than 40 Boeing 737 MAX 8s.

“We are trying to expand to all areas of the world- Europe, America, the Caribbean. We have a diverse number of clients including Sky (Chile), SAS (Scandinavia), and Salam Air (Oman) -Mustafa Mustafic, ALAFCO Marketing Officer

Garuda Boeing 737 MAX
Garuda Indonesia leases two Boeing 777s from ALAFCO. Photo: Boeing

With over 40 737 MAX jets ordered, ALAFCO’s plans for growth have been hampered by the worldwide ban.

“We are doing our best to handle these issues…we are still waiting for deliveries. We will see if they fix the problems” says the company’s marketing officer, Mustafa Mustafic.

When asked about the prospect of demanding compensation, Mustafic replied saying, “If they (Boeing) are progressing in resolving that issue and then we will make an agreement with them through our management…we’ll maybe have compensation, or (look at) terminating our contracts with them…”


ALAFCO may never catch up to the biggest lessors on the market, but it certainly has a role to play in supplying small and medium-sized airlines with the aircraft they need. The world of aircraft leasing is an interesting one and we appreciate the opportunity to sit down with ALAFCO to find out more about them and the aircraft they deal with.