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Airport users to incur higher costs on privatisation- IATA

In Summary

• When airports are privatized, the pressure to maximize shareholders returns often outweighs the objective of delivering user benefits.

• In the latest report, the need for airport privatization is raising quick cash for governments.

The international arrivals unit at Nairobi's Jomo Kenyatta International Airport
The international arrivals unit at Nairobi's Jomo Kenyatta International Airport
Image: File

International Air Transport Association has poured cold water on Jomo Kenyatta International Airport privatization bid, saying such a move has never achieved desired results.

In the latest report, the need for airport privatization is raising quick cash for governments.

“The driver for airport privatisation is often a focus on short-term cash gains for government coffers rather than improved efficiency, better customer service, and financing for infrastructure investment,” the report stated.

The report relates to similar moves adopted globally including Heathrow Airport in London.

“The UK parliament voted for a national airports strategy that paves the way for the long-overdue expansion of Heathrow Airport although opposition remains and cost concerns have not been resolved,” it added.

IATA also added that for countries such as Australia and Portugal, progress in safeguarding the interests of airlines and passengers have remained slow resulting to increased costs for all airport users and customers.

The report comes after Transport CS Jamas Macharia said before a national assembly committee in April, that the government would recede on plans to merge Kenya Airways, known as KQ with JKIA and find alternative ways to recover the airline' s financial woes. 

In a KQ plan, contained in a Privately Initiated Investment Proposal (PIIP), the national carrier had planned to manage operations at JKIA for a concession period of 30 years.

The issue raised public concerns as KQ is privately owned by government holding 48 per cent stake, KQ Lenders Ltd comprising of banks at 38.1 per cent, Dutch-airline, KLM 7.8 per cent, minority shareholders 2.8 per cent, and KQ employees 2.4 per cent.

“Airports do not usually have competition. When they are privatized, the pressure to maximize shareholders returns often outweighs the core objective of delivering user and consumer benefits,” it stated.

 

However, the global airline trade association pointed that the move is usually underpinned to improve infrastructure investments including modernised air traffic management (ATM) systems, expansion of runways and redusing cost of operations.

In 2018, IATA reported that jet fuel costs accounted for about 24 per cent of airlines’ operating costs.

This is however attributed to lack of competition in fuel supply and unjustified duties, fees and taxes on jet fuel in some parts of the world.

“In 2018, jet fuel prices in some countries in Africa, Americas and Central Asia were still significantly higher than the global average,” it showed.

In the year, demand for air cargo experienced a deceleration growing 3.4 per cent compared with 9.7 per cent growth in 2017.

Africa with the lowest 1.7 per cent market share of air cargo recorded a decline in demand y 1.3 per cent despite a 1.0 per cent rise in capacity.

IATA predicts 2.0 per cent growth in freight tonne kilometers for this year.