Lufthansa ups stakes with JKIA food unit

German multinational Deutsche Lufthansa has won the tender for a second in-flight catering unit at the Jomo Kenyatta International Airport (JKIA) in Nairobi, ending the six-decade monopoly of NAS Servair that is set to spark a price war.

The firm, through its catering subsidiary LSG Sky Chefs, won the international tender floated by the Kenya Airports Authority (KAA) in July 2012.

This will offer NAS Servair, which is owned 15 per cent by Nairobi bourse-listed Centum Investment, competition in what players in the aviation business reckons will broaden product offering and lower food costs as airlines race to trim their expenses.

In-flight meals for airlines operating at JKIA and Moi International Airport, Mombasa, accounts for about 80 per cent of NAS Servair revenues.

“LSG Sky Chefs won the contract some time last year giving them the go ahead to develop and operate the country’s second in-flight catering facility,” said KAA spokesman Dominique Ngige without giving details. “KAA and Sky Chefs are now in negotiations about all the modalities of the contract and how they will be met.”

The Business Daily failed to establish the exact details of the agreement like construction timelines and the capital investment from the firms’ representatives based in Frankfurt, Germany.

Sources familiar with the deal say Lufthansa has partnered with local shareholder, one of the terms of the tender, and that the bulk of the Kenyan unit’s top management will seconded from Lufthansa’s global operations.

The entry of the German company will dim NAS Servair’s plan of increasing meals prepared at the two Kenya’s airports to 18,000 meals per day by 2016 from the current 12,000 meals on the back of JKIA’s expansion and Kenya Airways growth.

Kenya is the fifth country in Africa where Sky Chefs has presence through joint ventures. Others are Egypt, Angola, Tanzania and South Africa where it has three facilities in South Africa. NAS has operations in 14 countries in the continent.

“We are indeed working to set up a new facility in Nairobi, Kenya,” Josefine Corsten, spokesperson for LSG Sky Chefs, said on Monday in an e-mail response.

“However, as negotiations and discussions on the details of the agreements are still ongoing, we do not want to comment more specifically at the moment.”

The shifts in the airlines catering business comes three years after French multinational Servair acquired a 59 per cent stake in NAS from Kenyan investors led by the late Philip Ndegwa’s family who were exiting the company — established in 1949. The Ndegwa family also has interests in NIC Bank and ICEA Lion Insurance.

The deal was estimated at more than Sh2.25 billion ($26 million) and was billed by legal research firm IFRL1000 as one of the biggest buyouts involving a private firm in Kenya.

Centum also increased its stake to 15 per cent from nine per cent in 2010.

“Soon there will be another player. This could see us lose some of our customers,” said Eric Rouvillois, NAS Servair’s general manager told the Business Daily in an earlier interview.

“But the competition will enable us to prove to the market that we are good and competitive.”

NAS Servair has diversified its business to include offering meals to Kenyan firms and learning institutions.  It has also expanded and revamped its business to match the emerging competition.

Nearly 50 airlines operate from JKIA, but Kenya Airways accounts for more than half of the meals offered by NAS Servair.

In December, Kenya began work on a Sh56 billion expansion of JKIA in what is expected to offer new business to the caterers and cement its status as a regional commercial hub.

The new terminal will be able to handle 20 million passengers when completed, three times the existing passenger flow through the airport.

Kenya Airways has blamed a lack of capacity for delays to its own expansion plans.

“While competition is good and welcome, the current airport expansion plans will unlock the airport’s potential and ensure that there is enough for the two caterers and maybe even necessitate a third,” said Mr Ngige.