17 December 2012

Kenya: President Approves Airport Bid

The aviation sector in Kenya and, in the wider region, will be jubilant as news emerged from Nairobi that the last cabinet meeting chaired by President Kibaki has approved the financing proposals by the Kenya Airport Authority (KAA).

This will handle the pending Project Greenfield, which includes the building of a second runway, and also the subsequent modernization and refurbishment of the present terminals one to three at Jomo Kenyatta International Airport (JKIA).

The various components of the ongoing works at JKIA and the planned expansion are worth summarizing here once again for the benefit of readers:

Project Greenfield - This project is set to catapult Kenya's aviation industry into the 21st century with a new mega terminal to be primarily used by national airline Kenya Airways and its alliance partners.

The tender awards have been concluded and the remaining financing package is currently being finalized with Chinese state-owned banks used to facilitate major contracts of this nature.

Groundbreaking is expected to take place next year, and construction is likely to kick off proper by November 2013 with a completion date for the terminal by 2017.

Cost of this component is at current prices about 55 billion KShs. The second runway, which is part of this project, will see construction start in 2013, too, and is expected to last about 3 years and estimated at just under 13 billion Kshs.

Terminal Four - This ongoing construction which started in Q3 of 2010 will probably be completed in late 2013 but delays are reported on sourcing and tendering of equipment and furnishings which may delay opening into early 2014.

This new terminal will cost just below 10 billion KShs when complete and cater for an increase in passengers until Project Greenfield will come on line, in addition of which it will allow for the start of work on the present terminal building which was opened in 1978 and is now processing nearly 3 times the initial capacity.

Terminal 1 - 3 Renovations - This project will only start when Terminal Four is fully operational and then be carried out in phases, at an estimated cost of around 8 billion KShs at current prices.

In order to finance these ambitious projects, in July, KAA doubled the passenger tax for international departures from US$20 to US$40, and the expected increase in flights and passenger numbers is, according to a source close to KAA, sufficient for the repayment of loans viable, leaving enough cash flow at hand for recurrent and further investment expenditure in the coming years.

For 2012, over 7 million passengers are expected to fly in, through, and out of Nairobi's JKIA, and passenger growth for the next few years is expected to be in the 10-15 percent range, making the timely completion of all pending projects an absolute must, if Kenya Airways' ambitious expansion plans, set to double their fleet by 2016, is to materialize.

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