Air transport in the region has yet to see the successful liberalisations of Europe and South and East Asia. This represents an enormous opportunity in Djibouti for growth – in more frequent flights by the domestic and expat populations, higher cargo tonnages and much greater hub traffic – passengers and cargo.
However, the air transport sector in Djibouti has experienced serious problems, and has been in decline.
Air cargo is at surprisingly low levels, especially for a shipping hub and free zone. A dispute with Ethiopian Airlines resulted in suspension of their services for a short period. The airport itself is a monument to lost opportunity, with retail and service purchases at the airport at a very low level.
Under pressure from the region, DP World obtained a concession, but a series of successive extra-contractual demands from the state, considered confiscatory by the investor, disrupted the economics of the deal and the concessionaire withdrew. The airport is a Regie Autonome with opaque finances.
Such an airport in a region is ‘an opportunity waiting to happen’. The scope for cargo and passenger hub traffic is immense. Multiple concessions and land rentals are envisaged for the airport, to avoid the monopolistic practices of similar commercialised airports.
Whilst existing treaties will be honoured, subject to negotiation, it is intended that low cost airlines be allowed to use the airport. In the medium term this is likely to require additional investment in the airport infrastructure. LCCT in Kuala Lumpur is seen in part as a model for this development.
It is also anticipated that such investments and a restructuring of the sector, will create in excess of 5,000 jobs.
Getting things done
Reform and investment in this sector will not require any significant state expenditure, and no state borrowing is envisaged. The passenger hub business is likely to create tourism spin-offs as many transiting hub passengers choose to break they journeys in Djibouti and use local tourism facilities. This will take time to develop, and the short term reform priority will be restructuring the finances and improving airport revenues.