Airline boom brings headache

front hosea kutako 2 sep 2016Uncertainty surrounding the construction of a new international airport could come back to haunt the country, as it emerged that the existing Hosea Kutako International Airport (HKIA) is inadequate to handle increased air traffic volumes, brought about by overseas airlines flocking into the Land of the Brave.
Initial government plans to push ahead with the construction of the new airport terminal were suspended, following an uproar over the costs, which had been pegged at N$7 billion at the time, amid allegations of tender irregularities in the awarding process.
Although the case is now before the High Court, with the preferred bidder, Chinese government-owned construction company Anhui Foreign Economic Construction Cooperation (AFECC), suing government over the cancellation of the tender, the recent and imminent arrival of international carriers like Condor Airlines, Qatar Airways, Dutch carrier KLM and Ethiopian Airways, could present capacity challenges for the Namibia Airports Company (NAC).
The situation could even worsen, amid revelations that Dubai-based Emirates, Kenyan Airways and Turkish Airlines are also planning to ply the Namibian route, using Hosea Kutako as a stopover for their other regional routes.
“Hosea Kutako International Airport has exceeded its capacity, however, in order to capture the market and to give meaning to Namibia’s commitment as a logistics hub, we have come up with strategies to cater for increased traffic through slot allocation,” NAC Strategic Executive for Business Strategy Toska Sem told the Windhoek Observer.
She said although the decision to move ahead with the construction of the new airport rested with government, as the shareholder, an urgent need existed.
 “As the Namibia Airports Company, the need to build a new international airport is not new; we already identified this as a strategic move to position Namibia as a key aviation player on the continent. It is not debatable that we have raised the necessary interest of airlines to utilise Namibia for aviation purposes.
“The increased interest must then be acted upon by building a new world-class facility that can cater and capture this demand,” the NAC executive said.
Although the NAC says Hosea Kutako is designed to cater for 400 passenger movements per hour, in 2013 the airport struggled to cater for the over 250 passengers on the Frankfurt route.
“Hosea Kutako International Airport handles over 800,000 passenger movements annually, and this figure is expected to increase with the introduction of new airlines calling at Hosea Kutako International Airport,” Sem further said.
Over N$300 million has already been pumped into the upgrading of the Walvis Bay and Ondangwa airports, with Hosea Kutako lagging behind.
“It is also important, in order to position Namibia as a logistics hub in the region, that a new world-class facility is built. We have already built new passenger terminals in the outlying areas of Walvis Bay and Ondangwa, and these would be used as feeder airports in the hub-and-spoke strategy we have adopted, so in essence we have constructed the ‘spokes’, and now we need to build the hub (the new HKIA),” she said.
The increased air traffic volumes augur well for the NAC, with the airports’ operator, according to insiders, poised to generate over N$24 million annually from passenger, landing and parking fees, as well as from office space rentals, through the Qatar route deal alone.
“It is expected that revenue will increase significantly, in terms of aeronautical revenue (revenue generated from aircraft related operations) and non-aeronautical revenue (revenue related to commercial services i.e. restaurants, duty frees etc.), however, due to corporate confidentiality, we will not be able to quantify this to the media,” Sem said.
The arrival of the new airlines has become a headache for national carrier, Air Namibia, with the airline saying that the move could impact negatively on its operations, which were this year bolstered by a N$600 million injection from government, an amount projected to increase to N$700 million next year.
“We are in an industry where competition is one of the biggest risks any player faces. While a lot of excitement is created by these announcements, one needs to consider the long-term effects,” Air Namibia Corporate Communications Manager Paul Nakawa said this week.
“The increase of flights does not mean that Namibia experiences a dramatic increase of demand or passengers. The driving force for some of these new airlines is simply that the markets they are serving are delivering. An extension to Namibia therefore just serves as a means to sustain the primary route and that can change at any given time.
“There are a lot of airlines out there having growth ambitions, which are above average industry traffic growth rates, and what they do is bring excess capacity into the market and this impact heavier than normal and natural competition.
“We have always had competition at Air Namibia, and this continues, but perhaps the level of competition we face has never been this high.”
Interestingly, the concerns by Air Namibia came as it emerged that the airline sits on the committee that recommended the approval for the foreign airlines to fly into the country.
“Yes, Air Namibia is a member of that committee. Air Namibia’s position is not only for Air Namibia; we are talking about a government position.
“If the government sees the benefits, the economic returns for the government, obviously that will be the position it’s going to take,” Sem said.
“Government does not take an individual position, but a stakeholder position, because Air Namibia is also a committee member.
“What we are saying is Air Namibia is not going to lose out in this deal through its direct flights to Frankfurt for passengers brought in by the airlines. We have a leverage of supporting Air Namibia to tap into the market and distribute to Harare, Gaborone, and Johannesburg etc,” she added.
Hosea Kutako International Airport handled 794,780 passengers and about 14,371 aircraft last year.