Ethiopia is planning a $4bn mega airport in Addis Ababa that is intended to serve as many as 120m passengers annually when it opens in more than a decade’s time. This will put it on par with the new Istanbul Airport that is now under construction and, if it comes off, will offer one of Africa’s biggest duty free and travel retail opportunities further down the line.

The new airport will have four runways, several passenger terminals and an airport city on the outskirts of the capital. “The project reflects the scale of Ethiopia’s economic ambitions and will form an important component in developing the country’s tourism and light manufacturing sectors,” says Charles Pembroke an analyst at UK-based risk intelligence house PGI.

The scheme is helped by strong growth (and profits, see below) by national carrier Ethiopian Airlines (+17% seat growth in the 12 months to September) which has been a ‘good news’ story for Africa amid a difficult period for the continent, hit by multiple terrorist attacks and health scares. The government wants to transform Addis Ababa into an aviation hub for the African region in the way that Dubai and Istanbul have done in their regions through national carriers Emirates and Turkish Airlines respectively.

SECURING FINANCE

However Pembroke warns: “The project is at risk of delays due to challenges securing finance, while the huge costs entailed threaten to exacerbate foreign exchange shortages in the coming years.”

The planned airport will be one of Ethiopia’s most ambitious projects, surpassed only by the $4.8bn Grand Ethiopian Renaissance Dam and demonstrates a commitment to state-led investment in huge infrastructure projects.

However, such schemes are putting enormous pressure on Ethiopia’s public finances with the IMF reporting Ethiopia’s public debt-to-GDP ratio at a high 50%. Access to finance and liquidity could therefore curtail big projects.

The new hub plans are in addition to an ongoing $350m expansion of Addis Ababa’s existing Bole International Airport which now ranks fourth in Africa, having overtaken Cape Town. That expansion is set to increase capacity from 6m passengers annually to 22m by 2018.

TOURISM TARGETS

The two developments combined should transform Addis Ababa into one of the largest aviation hubs in Africa and will help Ethiopia to develop its tourism and light manufacturing sectors. In August the culture and tourism ministry announced plans to triple Ethiopia’s annual foreign visitors to 2.5m by 2020.

Tourism currently generates $2.9 bn for the economy and several international hotel chains have set up operations in the country in recent years. PGI also notes that global brands such as Unilever, General Electric and GlaxoSmithKline are all planning investments that will supply international markets from Ethiopia.

ADDIS ABABA TO OVERTAKE NAIROBI?

At a time when major African airlines, including South Africa Airlines (SAA) and Kenya Airways, are scaling back operations or facing financial difficulties, Ethiopian Airlines reported record profits of $175m in 2014/15.

Of the four African airlines that carry more than 5m passengers annually, Ethiopian Airlines has doubled its traffic since 2009 and increased the number of aircraft in its fleet, while the other three – SAA, Kenya Airways and Royal Air Maroc – have seen virtually no growth, says PGI.

Pembroke  says: “With the arrival of the new airport, Ethiopian Airlines will be well positioned to consolidate its market share, benefiting from increased passenger traffic and air freight. This is likely to see Addis Ababa emerge as the principle aviation hub in East Africa, overtaking Nairobi over the next decade.”