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are seeding a Shariah-compliant aircraft leasing fund to cater to growing demand for commercial financing from airlines in the Middle East, Asia and Africa.The fund, which will exclusively finance Airbus aircraft, has a target size of $5 billion and could help boost the European planemaker’s edge against Boeing in the fast growing commercial airline market in the Gulf region.The European planemaker developed the fund together with Dubai-based Quantum Investment Bank and Palma Capital, and will seed it together with the IDB. Cayman-based International Airfinance Corporation will serve as fund manager.Gulf airlines such as Etihad Airways, Emirates and Qatar Airways have transformed the aviation industry over the last decade through aggressive expansion, while Islamic finance is a growing element to win business in the region.“Our main goal is to attract new sources of capital to our industry for the benefit of our customers. Our market has become a lot more international, in particular in the financial market,†Yann Ballet, head of project and structured finance at Airbus Group, said.With an order book that is heavily weighted toward Middle East and Asia, Airbus was keen to develop an Islamic finance solution to cater to that part of the world, he added.“We came very quickly to the conclusion that Asset-based finance is very attractive under Islamic finance principles.â€The fund will use a 4-to-1 mix of Shariah-compliant debt and equity, with the first tranche expected to close by the end of September, Ballet said, adding the fund already had existing investor commitments and several transactions in the pipeline.Use of lease financing has expanded among commercial airlines. Large carriers, which tend to secure lower lease rates, reduce the risk of a fall in the value of their fleets, while smaller rivals gain aircraft they could not buy outright.Commercial aircraft financing surpassed the $100 billion mark for the first time last year and this figure is set to be higher this year, a report by consultancy Flightglobal said.Lease financing currently represent a third of aircraft deliveries and this could reach half of all new aircraft deliveries by the middle of the next decade.Gulf-based carriers are prominent in Airbus’ order book, but the fund’s geographical mandate covers all of the IDB’s 56 member-countries, which could see it extending financing well beyond the region.In May, Indonesian airline Garuda Indonesia secured $100 million in financing from a unit of Malaysia’s Maybank to fund its operations and expansion.In 2012, Sri Lankan completed a $175 million Shariah-compliant loan facility from a syndicate of five Gulf-based Islamic banks. 