Economy

Wamae group sparks airport service jobs war

duo

Mr James Ndegwa (left) and Mr Matu Wamae. Photos/FILE

Kenya’s multi-billion shilling airport services business is primed for a fierce battle with the expected entry of a multinational group that is backed by local tycoons.

The team of rich market raiders is led by Matu Wamae, the billionaire chairman of milk processor New KCC, and is expected to fight every inch to loosen the grip of NAS Servair – the equally well-oiled and deeply rooted  monopoly that is backed by corporate Kenya heavyweights such as the Philip Ndegwa family.

Mr Wamae, a well-connected former MP, has partnered with Ndung’u Gathinji, the chairman of Drummond Investment Bank, to bring the German multinational Deutsche Lufthansa into the airport kitchen services at Nairobi’s Jomo Kenyatta International Airport (JKIA).

Lufthansa plans to deliver the services through its catering subsidiary, LSG Sky Chefs and the local investors are negotiating to get on board through Apatana Investments.

LSG Sky Chefs recently won the tender to set up the second in-flight catering facility – ending NAS Servair’s monopoly in the market.

Mr Wamae, however, told the Business Daily that the partnership deal with Lufthansa was being negotiated and would be made public once complete.

“I am sure Kenya Airports Authority (KAA) will make it public when the deal is signed,” he said.

READ: Lufthansa ups stakes with JKIA food unit

Mr Wamae, 75, has been the New KCC chairman since 2002 when he failed to secure re-election to Parliament where he served for two terms.

He initially served as the executive director of the Industrial and Commercial Development Corporation (ICDC), an investment arm of the government.

Mr Wamae owns shares in the Mount Kenya Coca-Cola bottling factory and is among the principal shareholders in the NSE-listed Olympia Capital. The businessman has also invested in the hotel industry through his Ngong Hills Hotel on Ngong Road, Nairobi.

Mr Gathinji is a lawyer whose company, Drummond Investment Bank, is one of the oldest members of the Nairobi bourse.

He has served on several boards, including chairing the Nairobi Securities Exchange, Ernst & Young East Africa and the Institute of Certified Public Accountants of Kenya.

By angling for the Lufthansa partnership, the two (and their partners) are looking to win a slice of the lucrative airport catering business that is expected to grow significantly with the ongoing expansion of JKIA and the construction of a greenfield terminal.

JKIA alone handles more than six million passengers annually through 46 airlines that are mostly served by NAS Servair.

The Sh56 billion Terminal 2, whose construction President Kenyatta launched last December, is to be completed by 2017 and is expected to handle about 20 million passengers annually. Its construction and the introduction of a second inflight catering kitchen are two of the Government's 50-odd high-priority public-private partnerships.

At the moment, NAS Servair serves about 11,000 in-flight meals per day — more than half of which are on Kenya Airways, the national carrier.

The cost of free in-flight meals on flights out of Kenya is a well-guarded secret but averages $6-10 (Sh510-850) on global flights. Meals available outside the cost of the ticket, say industry players, can be priced at between Sh4,000 and Sh5,000, depending on an airline’s specifications. Hundreds of millions more are made offering laundry services, as well as catering in airport terminals and to corporate bodies.

The fact that the ever-expanding industry has only a single caterer is what appears to have caught the attention of Mr Wamae and Mr Gathinji.

“It is still a bit premature to comment on this since we are still in talks with LSG Sky Chefs who are going to be the principal shareholders,” said Mr Gathinji.

“After Easter (next week), things may have progressed and we could have something concrete.”

If the deal sails through, Mr Wamae and team will have to battle it out with the Ndegwa family business juggernaut that is deeply rooted in Kenya’s financial services and real estate sectors.

In 2010 French multinational Servair acquired a 59 per cent stake in NAS Airport Services from Kenyan investors led by the Ndegwa family who were reducing their stake in the company established in 1949. This led to the change of name to NAS Servair.

This deal ensured that the caterer continued enjoying a monopoly in the local airline catering market, serving clients like KLM, Air Mauritius, Precision Air and British Airways.

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

On Wednesday, Richard Omwela, the chairman of NAS Servair and one of the lawyers who handled the deal, declined to confirm whether the Ndegwas had sold their entire stake in the deal.

“Please contact the Ndegwa family who are available in Nairobi on the issue of whether they sold out or not as I am not authorised to speak on their behalf,” said Mr Omwela in an email response to our enquiries.

By choosing to form a joint venture, LSG Sky Chefs — which has presence in 54 countries — is replicating a business model it has perfected in Africa.

The company operates in four African countries, including Egypt, Tanzania, and Zambia, where it set up through joint ventures. South Africa, where the company has three facilities, is the only country where it set up own operations.

LSG Sky Chefs, which delivers 532 million meals a year, is looking to use Africa expansion to grow its revenues which in 2013 stood at Sh300 billion.

Corporate communications director Kerstin Cynthia Lau confirmed that they were indeed pursuing a joint venture model in Kenya.

“We can confirm that LSG Sky Chefs is in talks with different, also Kenyan partners to establish a joint venture at JKIA,” she said.

“We kindly ask for your understanding that we cannot give you any additional details as the negotiations are ongoing.”

The entry of a new player is expected to pile pressure on NAS Servair that has for years operated without competition.

With KQ’s expansion and the expected completion of the new terminal, NAS Servair expected their business to grow to about 18,000 meals daily by 2016.