State banks on Adani-JKIA deal to ward off regional competition

 

An aerial view of the JKIA arrivals and departure terminal

The government is banking on the planned infrastructure upgrade and management of the Jomo Kenyatta International Airport by Indian firm Adani, to retain Kenya’s regional aviation hub status, it has indicated.

This is in the wake of increasing competition from neighbouring countries, which are heavily investing in airport infrastructure, with the potential to displace Kenya as the gateway to East Africa.

Government spokesperson Isaac Mwaura has called on Kenyans to embrace the Indian multi-national-Adani Group Holdings, which plans to invest in the country through a public-private partnership.

According to Mwaura, the Jomo Kenyatta International Airport (JKIA), a key national asset constructed in 1978 and managed by the Kenya Airports Authority (KAA), has seen significant infrastructure deterioration over the past 45 years, with its current state unable to support the growing passenger and cargo traffic.

The facility’s traffic surged beyond its 7.5 million passenger capacity to 8.6 million last year.

“We need a strategic partner and I can say without a doubt that Adani has a strong history of successful investment,” Mwaura said, with the firm having completed major investments in airports, sea ports, energy and other sectors.

Kenya is facing strong competition from neighbouring countries in what is seen as the major reason behind the government’s push to transform JKIA into a modern facility.

According to the Transport ministry, the proposed development presents a unique opportunity for Kenya to modernise its primary airport and enhance its regional connectivity.

Kenya is facing growing competition from Ethiopia, Rwanda, Tanzania and Uganda.

Rwanda for instance has partnered with Qatar Airways to develop an airport facility in a $1.3 billion (Sh220.4 billion) deal that will see the Middle East airline own a 60 per cent stake in the facility.

Rwanda is pushing to become a leading aviation hub in Central and East Africa through the project being developed under a Public-Private Partnership (PPP) with Portuguese construction firm Mota-Engil.

The ongoing expansion of Kigali International Airport further complements Rwanda’s infrastructure strategy, enhancing the country’s connectivity and positioning it as a key player in the regional aviation market.

RwandAir, the national carrier, has adopted an ambitious growth strategy that focuses on expanding its fleet and route network.

The airline has formed a strategic partnership with Qatar Airways, which acquired a 49 per cent stake in RwandAir, providing RwandAir with access to Qatar Airways’ extensive global network, aircraft leasing opportunities, and technical expertise, significantly enhancing the airline’s capabilities and competitiveness.

Rwanda’s investments in its aviation sector are aligned with the country’s Vision 2050 development plan, which aims to transform Rwanda into a middle-income country.

Ethiopia on the other hand has been expanding the Addis Ababa-Bole International Airport with the project being largely funded through international partnerships, including substantial loans from the Export-Import Bank of China.

It has transformed Bole into one of the largest and most modern airports in Africa increasing the airport’s capacity to handle over 22 million passengers annually, up from seven million, thereby positioning Addis Ababa as a major transit hub on the continent.

This has helped Ethiopian Airlines, Africa’s largest and most profitable airline with a revenue of $7 billion (Sh902.2 billion), aggressively expanded its fleet, route network, and global partnerships.

The airline operates a hub-and-spoke model, connecting over 125 destinations worldwide through its hub at Bole International Airport.

Last month, Ethiopian Airlines entered into a $6 billion (Sh773.3 billion agreement with DAR, a global consulting company, to design and construct the largest airline hub in Africa. The new mega airport will be situated near Bishoftu, Oromia.

“This is a significant milestone for Ethiopian Airlines as we continue to expand our operations and cement our position as a leading airline in Africa,” Group CEO Mesfin Tasew said.

In Tanzania, President Samia Suluhu’s government has been ambitious to build the country’s aviation industry with key investments in infrastructure, particularly at Julius Nyerere International Airport (JNIA) in Dar es Salaam.

The Tanzanian government has prioritised the modernisation and expansion of JNIA to increase its capacity and improve passenger experience.

The construction of a new Terminal 3, funded by the government and international partners such as the African Development Bank (AfDB), has enhanced the airport’s ability to handle up to 6 million passengers annually, positioning it as a key regional hub.

Additionally, the government is investing in the development of other airports across the country, including Mwanza Airport and Kilimanjaro International Airport, to bolster regional connectivity and support the growing demand for air travel.

Uganda has placed a strong emphasis on modernising its aviation infrastructure, with Entebbe International Airport (EIA) at the center of this strategy.

The expansion and upgrade of, supported by funding from the Export-Import Bank of China, aims to increase the airport’s capacity to handle up to 3.5 million passengers annually.

The modernisation efforts include the construction of new terminals, improved cargo handling facilities, and enhanced passenger services, all aimed at positioning EIA as a competitive regional hub.

Kenya's plan 

The developments in the region have since seen the Kenyan government seek a PPP to expand the JKIA to remain competitive.

Adani plans to invest up to $750 million (about Sh96.6 billion at current exchange rate) in a build-operate-transfer module that will allow it recoup its investment.

The concession Period will be 30 years with the contact seen by the Star ensuring protection of jobs.

“After the lapse of the Interim Management Period, AAHL (Adani Airport Holdings Limited) will make an offer to the employees that is no less favorable than the existing terms,” the contract reads in part, dispelling fears of mass layoffs by Kenya Aviation Workers’ Union (KAWU).

KAA and AAHL will appoint a technical consultant to conduct the environmental and social impact assessment of the project.

This process will entail engagement with the community around the airport and other stakeholders and a report subsequently published.

While triggered works are yet to be agreed upon, mandatory works include rapid exit taxiways, extension of the parallel taxiway to runway 24 threshold, new passenger terminal building, aprons, taxiways, support infrastructure, refurbishment of existing terminal and rehabilitation of existing airside infrastructure.

The contract gives KAA the right to step in the event of material breach by AAHL.

Airport charges will be finalised based on ongoing discussions with AAHL being solely responsible and liable for the payment of taxes.

A survey of the airport site shall be undertaken by an independent third party jointly appointed by the parties six months before hand back.

There are also provisions for the parties to meet promptly at request of any party to resolve any dispute.

“Failure to reach an agreement within 30 days, any party may request the party be referred to a technical expert to mediate the dispute,” the contact states.

The laws of Kenya shall govern the agreement.

A team of Kenyan officials is currently in India on a “due diligence” mission to scrutinise the firm’s books and previous projects before a final decision is made.

Kenya’s Labour and Social Protection Cabinet Secretary Alfred Mutua has since promised that documents on the deal will be availed to the aviation workers.

“The review of the proposal by Adani for JKIA upgrade is ongoing. The National Treasury will give a comprehensive submission after concluding the review,” Treasury PS Chris Kiptoo also said.

by MARTIN MWITA