Kenya seeks PPP for new Nairobi Airport terminal and runway – perhaps not best policy: part one
Slowly but surely Africa is starting to attract more external investment and management expertise into its airports, despite all the actual and perceived negatives about participating there. Qatar Airways is involved with a new airport in Rwanda, and VINCI has multiple concessions across the Cape Verde archipelago. Chinese companies are thereabouts, always looking out for the main chance.
In Kenya the state airline tried to take operational control of Nairobi's Jomo Kenyatta International Airport, the continent's 11th busiest, in 2022. As the airport is the airline's main base, Kenya Airways must have been concerned that two separate attempts to build a second runway there had floundered, the second one supported by the African Development Bank.
Now the government is seeking partners in a PPP to build both a second runway and a new terminal building. But such a commitment might not be attractive to many potential investors when traffic numbers remain low by international standards, and while concerns about political opaqueness remain.
This is part one of a two-part report.
- The Kenyan government plans to build a new terminal and second runway at Nairobi Jomo Kenyatta International Airport (JKIA) through a public-private partnership (PPP) model.
- The project aims to double the airport's passenger handling capacity and address inefficiencies and breakdowns in systems.
- The government seeks to reposition JKIA as the main gateway to East Africa and attract increased investor interest in the continent's aviation sector.
- JKIA experienced steady traffic growth before the COVID-19 pandemic, and capacity is slowly recovering post-pandemic.
- Kenya Airways and its low-cost subsidiary Jambojet dominate the airport's capacity, with Kenya Airways holding 49% of capacity and Jambojet at 15%.
- JKIA has a broad network primarily focused on East Africa, the Middle East, and Western Europe, but weak links to the Americas and Asia Pacific.
Summary
- The Kenyan government wants to build a new terminal and second runway at Nairobi Jomo Kenyatta International Airport.
- It is one of the main gateways to and from East Africa, but in various ways it is falling behind its competitors.
- There is need to reposition the airport as the main East Africa gateway and to tap into increased investor interest in the continent.
- There was steady traffic growth before the COVID-19 pandemic; capacity slowly recovering post-pandemic.
New terminal and second runway to be built at Nairobi's main airport; government hopes for PPP agreement
Kenya's Cabinet Secretary for Roads, Transport, and Public Works Kipchumba Murkomen said that the government intended to construct a new 'state of the art' passenger terminal at Nairobi Jomo Kenyatta International Airport (JKIA).
Mr Murkomen added that the government was seeking a public private partnership (PPP) model for the works, which would include a new runway. The project will aim to double the airport's passenger handling capacity.
Mr Murkomen said that this would solve the challenge facing the airport in terms of its capacity to serve passengers, which has led to "inefficiencies and breakdown in systems." He also noted that it would "provide jobs, boost tourism, trade and investment, and enhance regional integration".
He then went on to say that with the airport being a key port of entry for Kenya, it would be critical that the government worked on a PPP model that would facilitate the expansion of JKIA and "move to the list of the best airports in the world".
He urged the board to work with the government, stakeholders and investors to achieve the plan, and asked the board to review the KAA Act 1991 so that it could "concur with current developments in the aviation sector".
He concluded that there was a need to enhance security at JKIA and other airports in the country, both physical and cyber.
Need to reposition the airport as the main East Africa gateway and to tap into increased investor interest in the continent
There are two factors in play here.
Firstly, a need to reposition Nairobi Airport so that it can challenge others in East Africa - notably the existing and new Addis Ababa airports in Ethiopia - as the regional gateway, and secondly, so that it can tap into a small but viable increase in interest in investing in African aviation from outside the continent - such as Qatar Airways' investment in the new airport at Kigali, Rwanda.
Steady traffic growth before the pandemic; capacity slowly recovering
Passenger traffic grew steadily - if not spectacularly - at Nairobi from 2014 to 2019, before succumbing, like everywhere else, to the COVID-19 pandemic in 2019.
Nairobi Jomo Kenyatta International Airport: annual traffic, passenger numbers/growth, 2012-2021 (latest figure available)
Capacity has not yet retrieved the position of 2019, but is narrowing the gap.
As of the week commencing 17-Apr-2023, it stands at around 88% of what it was in the same week of 2019.
Kenya Airways and its LCC are dominant, hence also SkyTeam
The national carrier Kenya Airways is the dominant airline, with 49% of capacity and between 46% and 50% of movements between peak and off-peak.
The second largest airline by capacity is its fully owned LCC subsidiary Jambojet (15%).
Nairobi Jomo Kenyatta International Airport: system seats by airline, week commencing 24-Apr-2023
Jambojet was established to help meet rising competition in Kenya Airways' core markets from new independent LCCs.
The LCC model is better established in East Africa than in other regions of the country but even so, in Kenya only 2.7% of international seats are 'low cost' and the domestic market accounts for just 6.5% (Jan-Apr-2023). The figures are marginally higher in East Africa as a whole.
At JKIA 16.55% of seats are presently offered by LCCs, which is an unexpectedly high amount, but even so it is not a burgeoning demand for budget travel that necessitates a new terminal building and runway.
A broad north-south network, but remains weak to the Americas and Asia Pacific
As expected, most of the capacity is on East African routes, followed by the Middle East and Western Europe.
The single international country with the highest capacity is the UAE, followed by Tanzania, South Africa, the UK and Ethiopia. That suggests quite a broad network at Nairobi, and that is certainly the case, or at least it is on a north-south axis as the below map details.
Nairobi Jomo Kenyatta International Airport: network map for the week commencing 24-Apr-2023
There are many routes in East Africa and the Middle East and an adequate network in Europe for passengers via the main gateways, and for cargo.
Within recent memory there were few east-west routes across Africa, often necessitating a journey to a European or Middle East transit point to get between the two, but Nairobi does now have five destinations in that region.
The weak links are undeniably the Americas - with only one trans Atlantic service, to New York - and Asia Pacific, with two services to India (Delhi, Mumbai) and two Chinese ones (Changsha and Guangzhou, which began in Apr-2023).
Despite the airport's elevation, at over 5,000ft (1524m), the single 4,200m runway should be adequate to handle most long haul flights out of Nairobi, and that is another reason why 'a second runway is needed' can be discounted.
On the other hand, there are concerns about what happens when that runway is closed, as revealed later.
The only substantially longer routes that might be flown (that are not now) would be to the west coast of the US and Canada, to South Korea and Japan, and to Iceland (the two countries are coincidentally connected by the fishing industry, Iceland selling its advanced technology widely to African countries).
So the two main concerns behind this expansion seem to be capacity and planning for future growth.
Current utilisation of existing facilities is high on most days
Where capacity is concerned, usage is high.
The chart below is for Thursday 27-Apr-2023 and shows all but one of the 24-hour blocks in use for departing and/or arriving flights (as measured by their seat capacity). Most other days are much the same.
Nairobi Jomo Kenyatta International Airport: system seats per hour for 27-Apr-2023
All three major airlines alliances are present
JKIA also benefits from the presence of all three of the major airline alliances, and particularly SkyTeam (by way of Kenya Airways), which has 55% of the capacity - its main competitor in the region, Addis Ababa Bole Airport, has 97% of capacity on one alliance, Star.
There are two terminals. Terminal 1 is arranged in a semi-circular manner and is divided into four distinct parts rather than concourses.
Nairobi Jomo Kenyatta International Airport: system seats by terminal share
Terminals 1A, 1B, 1C, and 1E are used for international arrivals and departures, and 1D is used for domestic departures and arrivals.
Terminal 2 is used by low cost carriers, and right now is tiny by comparison, with less than 1,000 seats of capacity for the whole of the week commencing 24-Apr-2023.