New airline flies into trouble with watchdog

• Procurement agency says tendering of Embakasi airport is questionable

A new airline linked to a former transport permanent secretary, Gerishon Ikiara, is about to be granted the rights to temporarily own and operate the whole of the old Embakasi Airport and passenger terminal building.

OneJetOne is negotiating with the Kenya Airports Authority to be allowed to demolish the old airport and terminal and to construct a modern, low-cost airport terminal which it will own and control while sharing revenues with KAA under a “build operate and transfer” (BOT) arrangement.

Touted as East Africa’s first low-cost airline, its main promoter is Sri Lanka-born Kenyan resident Arjun Ruzaik.

OneJetOne plans to introduce East Africa to the fast-growing no-frills budget airline industry and to give the national carrier Kenya Airways a run for its money with low-cost operations and cheaper fares.

Since January, the airline has been on a recruitment spree, hiring pilots, cabin crew and engineers and has announced that it will begin flights this October. But the deal it is negotiating with KAA is turning out to be controversial.

The Public Procurement Oversight Authority, whose mandate is to investigate corruption in public procurement, has written to KAA managing director George Muhoho warning that the manner in which the deal was being done was not in line with requirements of transparent tendering.

In a letter dated January 29, 2009, the oversight authority said under procurement regulations, parastatals cannot enter into BOT arrangements without prior approval and consent from the authority.

“The Authority has not received any request for approval from your institution regarding the same,” added the letter.

It said that the transparent approach would have been for KAA to design and propose a standard plan for the type of development they desired at the old Embakasi airport and invite expressions of interest from interested airlines.

It is only in this way, the Authority added, that KAA could come up with a standard evaluation criteria for judging proposals from interested airlines.

In response to queries by the Sunday Nation, KAA said OneJetOne won the deal in a competitive tender that was advertised in the press.

Yet a close scrutiny of the newspaper advert that appeared on July 24, 2008 shows that the scope of the assignment was not made clear to the tenderers.

The advert merely talked of a tender for “utilisation” of the old Embakasi airport without specifying to prospective tenderers that what was at stake was a BOT deal where the successful bidder would be expected to demolish the existing Embakasi terminal, construct a new one, and enter into a long-term revenue-sharing deal with KAA.

It was only after the few tenderers who responded collected bid documents that they realised that what was being proposed was a massive project requiring a huge capital outlay.

The vagueness of the information in the advert perhaps explains why one of the only two tenderers who collected bid documents proposed to utilise the airport for as a flight training school.

Mr Ikiara told Sunday Nation that he was a director of OneJetOne and denied that there was any conflict of interest in the deal, having been a PS in the ministry under which KAA falls.

The controversy over tendering aside, aviation industry experts have questioned the wisdom of giving such an upstart company exclusive control of the old airport at a time when JKIA is seriously congested.

Opinion is unanimous within aviation circles that KAA’s priority should be to reduce congestion at the main airport. KAA had promised to decongest JKIA by relocating domestic operations from Unit 3 to the old Embakasi airport.

In 2002, a joint task force made up of top officials of Kenya Airways, the military and KAA recommended transfer of domestic flight operations to Embakasi.

Clearly, the idea of granting temporary ownership and control of Embakasi to OneJetOne came as an afterthought. Until recently, the old Embakasi terminal housed offices of a military department.

Two years ago, KAA spent Sh220 million to build new offices for the military on the grounds that the soldiers needed alternative accommodation so that they could clear the space for construction of a new domestic passenger terminal . KAA explained that it had to step in because the military did not have the money.

A recent audit report on KAA by the Efficiency Monitoring Unit has criticised this transaction, saying that the parastatal inherited dilapidated buildings while the military got new ones. The military has since refunded the full amount to KAA.

How KAA quickly changed its priorities from relocating JKIA Unit 3 to Embakasi to giving a third party temporary ownership rights and control of the old airport remains a mystery.

JKIA needs to increase aircraft parking space, expand the apron and increase aircraft taxi ways. The present terminal facilities were constructed and commissioned in 1978 with a design throughput of 2.5 million passengers per annum.

Since then, passenger throughput has increased to about 4 million a year, compounding the congestion problem. What is worse, 44.5 per cent of the area initially reserved for passenger processing in the international Units 1 and 2 was leased to the Kenya Duty Free Complex for contract duration of 20 years from 1991.

By KAA’s own account, 50 per cent of cargo freighters are parked and off-loaded at the passenger apron, thus heavily congesting this area. Although JKIA is being expanded and rehabilitated, the project is not expected to be completed before 2015.