Ethiopia: New airport plans are too ambitious to be run by state bureaucracy
Ethiopia’s plans to build a new airport billed as larger than Heathrow or Charles de Gaulle at Bishoftu south of Addis Ababa mean that the country’s process of economic liberalisation will need to change gears.
“The biggest issues for complex projects in Ethiopia are the bureaucracy and the weak logistics sector,” says Frans VanSchaik, CEO of African Asset Finance.
His company’s Ethio Lease unit in August became the first foreign-owned company to secure a financial services license in Ethiopia.
“Further liberalization, and especially easing the burden of the bureaucracy will go a long way in addressing these,” VanSchaik says. “I am certain that the government realizes that they will need to set more sectors free from unnecessary regulatory oversight and bureaucratic interference if they wish to achieve their goals.”
According to the CAPA centre for aviation, the project would be the biggest commitment made by any airline to operating an airport. “I see no reason why there would not be sufficient demand to justify an airport on a par with the largest in the world,” VanSchaik says.
He expects Ethio Lease to be able to benefit: “This will undoubtedly create additional demand for leased equipment, during construction and even more so once operational.”
New Centre of Gravity
Marcel Langeslag, director of aviation at Netherlands Airport Consultants in Johannesburg, is optimistic that the project will add to the momentum of economic reform in Ethiopia. Historically, “liberalisation and aviation development go hand in hand,” he says.
The “centre of gravity” of African aviation has shifted from the south to the east of the continent, Langeslag says.
- This is because Ethiopian Airlines has performed much better than South African Airways, while geography gives east Africa “a much more natural hub position” for flights into Africa from Europe or Asia, he says.
- Ethiopia “ticks all the boxes”, and the shift is also reflected by the new international airport being built in Bugesera in Rwanda, he adds.
Construction of the new airport is scheduled to start later this year, Ethiopian Airlines CEO Tewolde Gebremariam said in January.
- The lack of information on who will design, build and finance the airport suggests the timetable is “highly ambitious,” Langeslag says.
- It’s “not unlikely” that the timing of the announcement owes something to electoral considerations. “The government is still at a very early stage in the planning process.”
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Ethiopia’s existing airport at Bole has an annual capacity of less than 20mn passengers per year.
The target of 100mn passengers for the new airport, versus the previously mooted 80mn, is “quite ambitious,” Langeslag says, noting that airports are usually planned with a long-term perspective on passenger demand in 20 or 30 years’ time. “It will probably be built in a phased manner. They’ll start a lot smaller than 100mn.”
This will make the project more manageable in supply-chain terms, he adds.
Between three and five years is a realistic general timescale for a new greenfield airport, Langeslag says. VanSchaik and Langeslag agreed that there will be plenty of takers if the government decides to use a public-private partnership to build the airport.
Bottom Line: Ethiopia is in a strong position to tap into demand for public-private infrastructure partnerships, and signal that its economic liberalization steps are irreversible.