Recent examples underline the importance of regional development banks as a source of funding for infrastructure upgrades in emerging aviation markets
Soaring air traffic is prompting multilateral regional financial institutions to channel funds for airport upgrades. Typically, national governments submit their requests to regional banks, which appraise the proposal before reaching a verdict. Regional banks offer a lower interest rate and much longer term compared with commercial banks. Hence, over recent years, regional banks have provided considerable financing for airport upgrade and construction projects.
In November 2018, the African Development Bank (AfDB) pledged EUR75 million (USD85.6 million) in financial support for expansion and modernisation of the underutilised Rabat Salé International Airport in Morocco. Most of the loan is likely to be spent on expanding the cargo terminal, generating up to 1,700 jobs.
Also in November, an AfDB-financed airfield expansion project began at Jomo Kenyatta International Airport (JKIA) in Nairobi, Kenya. The Kenya Airports Authority (KAA) is the implementing agency.
A soft loan for the project was approved in November 2017. The project involves construction of a 4,900 m-long second runway that meets ICAO Category II standards, including connecting taxiways, additional parking stands for aircraft, and an aircraft rescue and firefighting facility. In addition to the USD113.4 million AfDB loan, the Kenyan government is investing USD20.9 million.
The KAA wants JKIA to become a regional hub that facilitates increased tourism and business travel to Kenya and expedites cargo traffic. The airfield upgrade is designed to enhance the reliability of air transport to and from JKIA by reducing delays at peak hours and costly flight diversions arising from incidences on the existing runway. Adding a second runway will address operational efficiency problems inherent in the existing single-runway facility.
New airfield facilities will also open up new markets for Kenyan horticultural exports (especially flowers) by enabling direct intercontinental flights to North America and Australia.
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