Lufthansa to break ground for inflight catering kitchen at JKIA

German multinational Lufthansa is set to break ground for the new Jomo Kenyatta International Airport (JKIA) inflight catering kitchen next month, with a targeted completion period of one year.

A Kenya Airports Authority (KAA) memo seen by the Business Daily reveals that Lufthansa has pledged to build the country’s second in-flight catering kitchen with a Tanzanian partner, besides the Kenyan partner that was initially disclosed.

KAA awarded the 25-year contract to construct and run the catering facility to LSG Sky Chefs, Lufthansa’s catering subsidiary, and Apatana Investments, a consortium of Kenyan investors who includes businessmen Matu Wamae and Ndung’u Gathinji. The Tanzanian firm, Continental Services Limited, is listed as a third partner.

“There is a site handover planned for August 2014 and construction is expected to commence shortly thereafter,” says the KAA memorandum.

Joint venture

The memo continues: “We have since proceeded to draw up necessary documents such as the letter of offer and lease, concession and building agreements. LSG have committed to have the facility in operation within 12 months of commencement.”

Kenya is the fifth African country where LSG Sky Chefs will have a presence through joint ventures. Others are Egypt, Angola and Tanzania. The German multinational owns and runs three facilities in South Africa.

The start of construction will set Lufthansa off on a journey that will see it end NAS Servair’s monopoly in Kenya’s in-flight catering business, which stretches back to independence. NAS Servair has over the decades enjoyed a monopoly in the Kenyan airline market where it serves all major airlines operating from JKIA and Mombasa’s Moi International Airport.

The new kitchen will offer tens of airlines a second choice from where to source for their meals, a scenario that could impact on quality of service and even prices. “It is still too early to give fine details of the type of kitchen we are planning to build but it will meet international standards,” Mr Wamae told the Business Daily on phone.

The Lufthansa-led joint venture will pay KAA a graduated concession fee based on their annual sales as well as a standard rental fee for the land that the kitchen will occupy.

If its annual revenues fall below Sh440 million in a year, LSG Sky Chefs will pay KAA five per cent of this amount while it will part with six per cent in a year where its revenues will be between Sh440 million and Sh660 million. Revenues above Sh660 million a year will attract seven per cent concession fees.

“The concession fee shall be subject to a minimum annual guarantee of $250,000 (Sh22 million) payable quarterly in advance, and a land rental fee at the rate of Sh15 per square foot per annum,” the KAA memo states.

In comparison, NAS Servair has been paying the airports Authority Sh60 million every year in addition to three per cent of their gross sales, according to the KAA memo. NAS Servair’s current concession was renewed on July 1, 2012 and runs for a period of 10 years.