The Kenyan Cabinet is reported to have approved a proposal to permit Kenya Airways to operate the country’s principal gateway and hub, Nairobi Jomo Kenyatta International Airport (NJKIA). Kenya Airways is expected to establish a holding company to operate NJKIA under the terms of a 30-year concession contract with the Kenya Airports Authority (KAA) with all NJKIA personnel being employed by the holding company.
The objective is to allow both the airport and the airline to better compete with Gulf airlines and the aggressive Ethiopian Airlines on a level playing field.
To avoid lengthy legal issues, the decision is to be effected through a concession with Kenya Airways designated as the private party and Kenya Airports Authority as the contracting authority. Under the new arrangement, NJKIA – currently under the sole management of the State-owned KAA, and with estimated annual revenues of KES7 billion (USD70 million) – is to be owned and managed by a holding company that will, in turn, be 100% owned by Kenya Airways under the concession agreement.
KAA will receive concession fees from Kenya Airways but will face the loss of approximately 90% of its revenues, which were generated by the airport. KAA will, though, continue running the country’s remaining airports but their contribution to its financial coffers is paltry in comparison.
These two large State-controlled institutions are being brought together under one roof in an effort to consolidate State assets in the aviation industry; effectively copying the model practised by Middle East carriers where airlines and airports are in common ownership.
Source: The Blue Swan Daily