Potential PPP opportunity for the expansion of the Hosea Kutako International Airport (HKIA), Windhoek, Namibia London, April 9, 2018
Where are we? In the African Context
Table of Contents Who we are? The inside story What is the opportunity? 3
Table of Contents Who we are? The inside story What is the opportunity? 4
Introduction NAC Background Information The Namibia Airports Company (NAC) Limited was established in terms of the Airports Company Act 25 of 1998. The NAC is a state-owned entity/enterprise and its portfolio ministry is the Ministry of Works and Transport. The NAC develops, manages and operates eight (8) : Hosea Kutako International Airport Eros Airport Walvis Bay International Airport Ondangwa Airport Katima Mulilo Airport Keetmanshoop Airport Luderitz Airport Rundu Airport 5
Table of Contents Who we are? The inside story What is the opportunity? 6
Introduction The inside story 1. The Hosea Kutako International airport (HKIA), from 2016 increased passenger demand, making the airport grow at double digit rates. This trend is projected to continue making it necessary to increase efficiency and capacity at the airport 2. To support the airport and position it as a gateway to Namibia and the Southern African Development Community (SADC), the Namibia Airports Company (NAC) has plans to expand the infrastructure, upgrade passenger facilities, and improve its service and operations. Specifically, the NAC has plans to: Comply with all Standards and Recommended Practices (SAPRs) of the International Civil Aviation Organization (ICAO); Carry out the necessary expansion on the airside to accommodate current and future demand, including apron aircraft parking; Extend the passenger terminal to improve the level of service to passengers and to accommodate future capacity providing an IATA Optimum level of service 3. The NAC has engaged the World Bank to support its analysis of current operations and infrastructure requirements options for the HKIA. 4. The objective is to explore public-private partnership (PPP) options to improve operational efficiency at the airport and to explore options to finance the envisaged refurbishment, upgrades and new assets required to satisfy the ongoing growth in demand. 7
Market Review: Namibian HKIA is the largest of all the managed by Namibia Airports Company (NAC) NAC Airports and population by region Ondangwa Airport (OND) Traffic 2016: 42,926 pax Rundu Airport (NDU) Traffic 2016: 7,893 pax Katima Mulilo Airport (MPA) Traffic 2016: 12,319 pax Walvis Bay International Airport (WVB) Traffic 2016: 121,538 pax HKIA - Hosea Kutako International Airport (WDH) Traffic 2016: 809,442 pax 14,500 ATM Lüderitz Airport (LUD) Traffic 2016: 5,202 Eros Airport (ERS) Traffic 2016: 74,356 pax Keetmanshoop Airport (KMP) Traffic 2016: 2,479 pax Population (2011) < 100,000 100,000 200,000 200,000 300,000 > 300,000 Source: Namibia Statistics Agency, NAC HKIA is over 7 times larger than Walvis Bay, representing 75% and 11% of the overall traffic, respectively 8
9 airlines are currently operating scheduled services at HKIA, with Air Namibia supplying almost 50% of the seat capacity Regional & international scheduled seat capacity (2017) 1 route 2 routes 1 route 1 route 3% 2% 5% 4% 6% 7% 7% 1 route 1.7 Mseats 1 route 45% 1 2 Air Namibia offers the greatest capacity in the domestic and international segments in terms of seats supplied and number of routes The introduction of Qatar Airways, KLM and Ethiopian has boosted the international capacity, inducing demand and canibalization 1 route 22% 3 routes Domestic scheduled seat capacity (2017) 8 routes 3 HKIA is connects to 15 international cities (3 additional to be added in 2018), with limited connectivity to European and Middle Eastern destinations 0.3 Mseats 4 HKIA is served by 9 airlines, making it comparable to with a much lower passenger traffic. Still no operations of Low Cost carriers 100% 3 routes Source: ALG Analysis with OAG data 5 Emirates, Turkish, Kenya Airways and Lufthansa have reported intention to initiate operations to/from HKIA 9
Market review: international routes HKIA is connected to 15 international cities, and three new destinations (Munich, Lagos and Accra) will be added in 2018 HKIA: International medium and long-haul routes HKIA: Regional Routes Amsterdam (AMS) 3 freq/w Cologne (CGN) 1 freq/w Frankfurt (FRA) 7 freq/w Luanda (LAD) 9 freq/w Munich (MUC) 2 freq/w (2018) Lubango (SDD) 2 freq/w Lusaka (LUN) 3 freq/w Qatar (DOH) 5 freq/w (2018 7 freq/w) Harare (HRE) 3 freq/w Victoria Falls (VFA) 4 freq/w Accra (ACC) (2018 through LOS) Lagos (LOS) 5 freq/w (2018) Addis Ababa (ADD) 4 freq/w Windhoek (WDH) Gaborone (GBE) 4 freq/w Saint Helena (HLE) 1 freq/w Johannesburg (JNB) 49 freq/w Durban (DUR) 4 freq/w Windhoek (WDH) Connection to hub Connection to non-hub Cape Town (CPT) 33 freq/w Source: OAG 10
Market Review: Namibia in Africa Handling over 1Mpax per year, Namibia ranks 27 th among the African countries in terms of passenger traffic 20 35 15 25 8 Windhoek (WDH) 14 29 23 31 Annual Traffic > 30 Mpax 10 Mpax - 30 Mpax 3 Mpax - 10 Mpax 1 Mpax - 3 Mpax < 1 Mpax 35 28 Population Population density GDP (current US$) GDP per capita (current US$) Namibia 2.48 million (41 st in Africa) 3 per km 2 (2 nd lowest in the world) Sub-Saharan Africa 1,033.1 million 44 per km 2 10.3 billion 1,498.0 billion 4,140.5 1,450.0 Source: FlightGlobal, CAPA, World Bank 11
Table of Contents Who we are? The inside story What is the opportunity? 12
What is the value proposition? (1/2) Traffic demand Handling approx 1,0 Mpax, after new routes added in late 2016 and 2017, HKIA is under serious congestion failing to provide a reasonable level of service during busy hours The situation will be worsened in the short /mid-term basis (2021-2030) where demand will increase by 50%. By 2027-2042 the demand will be doubled Capital Expenditures Immediate required investments Immediate remedies addressing airside non-compliance issues amounts USD 11,3 million Terminal capacity in the short-term should be USD 8,4 million at minimum, allowing to accommodate traffic expected within the next 5 years only ICAO Compliance To achieve compliance with respect to the RWY-apron separation, two proposals were presented: to expand the apron to the east for larger aircraft (USD 4.7M) a dramatically more expensive one, a new runway (USD 215M to USD 237M) Construction of additional capacity A new expansion will be required before 2025, offering a capacity above 1,3 MPax To accommodate the demand expected by 2045, and investment of approximately USD 152 million (base case) to USD 167 million (optimistic scenario) would be required 13
What is the value proposition? (2/2) Financials The benchmarking of fees and charges detected little room for adjusting them upwards A PPP scheme is a relevant option for airport development: Significant capital expenditures will be needed to comply with norms and accommodate capacity Any PPP scheme will have to contemplate the rest of the airport system 14
Next steps Actions Required by NAC: Immediate necessary investments at WDH to comply with ICAO even before any future reform (USD19m) Assessment of capex program to be carried out in the network (mostly ICAO compliance driven) A PPP would provide the solution for: Future compliance requirements Capacity expansion at WDH A concession scheme: support the investment program of HKIA + rest of the system (incl. Opex) Possible PPP structures: if HKIA Concession fees > requirements: traditional concession scheme + GON cross-subsidization if HKIA Concession fees < requirements: Traditional concession for NAC + additional external funding 15