JOSEPH: Proposed deal on JKIA in best interest of Kenya - Daily Nation

Proposed deal on JKIA in best interest of Kenya

Saturday March 16 2019

JKIA

Passengers stranded at JKIA on March 6, 2019 after workers went on strike. PHOTO | FILE | NATION MEDIA GROUP 

By MICHAEL JOSEPH
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There has been a lot of speculation about the proposed (note proposed only at this stage) Private Public Partnership (PPP) between Kenya Airways (KQ) and Kenya Airports Authority (KAA) for the operations of Jomo Kenyatta International Airport — much of it ill informed, inaccurate and, quite honestly, damaging for both parties and Kenya.

ILL-INFORMED

The proposal, which was initiated by KQ, and supported by the Kenyan Government through Cabinet approval, was firstly to reposition Nairobi as a major African hub for business and tourism. Businesses would find it convenient to place their headquarters in Nairobi bringing with them new jobs, more opportunities for Kenyan companies and to make connecting through Nairobi easier and simpler.

The second objective is to increase the importance of JKIA in terms of passengers and other airlines by improving airport facilities, terminals, runways and ancillary services. This would bring additional revenue not only to JKIA but also to KAA and Kenya Revenue Authority.

The third objective was to improve the financials of KQ so that it could expand both its fleet and the network, enabling it to offer more destinations to both Kenyans and visitors and compete on a level playing field with other airlines such as Ethiopian, Qatar, Turkish, Emirates and RwandAir, among others.

What seems to have escaped most of the ill-informed commentators is that the position of JKIA and Nairobi as a financial and business hub has been deteriorating over the last 10 years. Just look at what Ethiopia is doing at its revamped Bole Airport. Both passengers and cargo are moving to Addis Ababa. Why? Because their government has decided to invest in both its airline and airport as a strategic move for the country. Rwanda is doing the same.

MISTAKES

What is Kenya doing? Have you seen the state of our airport? Do you know that KQ’s operating costs are among the highest in the world? Kenya allows everyone to fly here but we, as KQ, are not afforded similar rights in our neighbouring airports. Do you know that we carry less than three per cent of the cargo leaving JKIA? Do you know that foreign airlines are allowed to carry cargo from Nairobi to anywhere in the world but we are restricted? Do you know that all revenue from aviation in our competitors’ aviation hubs stays within the hubs and goes to improving both the airline and airport? The essence is to create a system where all the assets are supporting each other. Is it going to help KQ? Yes, of course.

Yes, we have made mistakes over the years — we have never admitted that this is a unique industry requiring special skills and financial investments. We have not invested in our staff with the result that now we have to employ more expatriates than we would like. We made some bad financial decisions in the past which we are now trying to rectify. The fact is that if we do not grow our network, our fleet, our systems, our airport and our staff, we will be relegated over the next years to becoming smaller and smaller and perhaps even cease to exist.

I came on board as Chairman of KQ to restore the pride in the Pride of Africa and to grow this airline and this industry to be an important component of Kenya’s Gross Domestic Product. It is disappointing to read comments from people, politicians, union leaders and business people that this is a corrupt deal that will benefit a few, that will destroy KAA and KQ and that will lead to a loss of jobs.

Most of these comments are ill-informed because most people are not aware of the challenges facing our airline and do not understand the process of a Privately Initiated Public Proposal. This is only a proposal at this stage which needs to be reviewed, analysed and, if thought to be in the best interest of both parties, approved. We are still in the proposal phase and to ridicule it at this stage is premature.

CONCESSION

This is a well-thought-out proposal after considering a number of other options. This is considered to be the best option for Kenya as a whole, KAA, KQ and all the various stakeholders and shareholders. This was not done to protect any bank or individual or family but a clear business decision based on the proposition that KQ should be seen as a strategic asset of Kenya (even though it is only 48 per cent owned by the Government of Kenya and hence the Kenyan taxpayer), and should be able to compete on a level playing field with airlines that are mostly 100 per cent State-owned together with their airports.

There is no intention to take over the most important and profitable asset of KAA without ensuring that the authority receive an appropriate concession fee to allow them to continue to operate all the remaining airports and airstrips cost effectively. This concession fee will be part of the negotiations, which are yet to begin, together with other important criteria such as job protection, service level agreements, commitments to build and/or improve the JKIA terminals and infrastructure and, most importantly, to treat all other airlines equally and correctly in exactly the same manner as KQ.

Despite the various allegations, there will be no job losses from either JKIA or KQ but indeed we estimate that there will be an increase in the number of jobs in the Kenyan aviation industry. We are forecasting that the number of KQ aircraft will double over the next five years, the number of jobs will increase over the concession period to more than 3,000 from the 950 currently and the number of passengers will increase from 7 million to nearly 12 million by 2022 and to 30 million by the end of the concession.

In conclusion, I believe that the current PPP proposal is in the best interest foremost of Kenya and Kenyans, business, tourism and will increase the country’s GDP.

The writer is the Chairman, Kenya Airways board of directors.

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