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    Air Transport Annual Report 2009 The World Bank Group IBRD, IDA, IFC & MIGA


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    Abbreviations ACIP AFI Cooperative Implementation Plan (ICAO program) ADS-B /-C Automatic Dependent Surveillance – Broadcast /– Contract AFI Africa and Indian Ocean Region (ICAO definition) AFTTR Transport Unit of the Africa Region (WBG) ATAG Air Transport Action Group (affiliated with IATA) ATC Air Traffic Control ATM Air Traffic Management CAA Civil Aviation Authority CASDR IFC Advisory Services Department (WBG) CES Charles E. Schlumberger, Principal Air Transport Specialist (WBG) CINTS IFC Infrastructure Department, Transport Division (WBG) CNS Communication Navigation Surveillance Services/Systems GNSS Global Navigation Satellite System GPS Global Positioning System DOT Department of Transportation of the United States of America DPL Development Policy Loan EASA European Aviation Safety Agency (agency of the European Union) ESW Economic Sector Work ETWTR Transport Unit of the Energy Transport Water Department (WBG) FAA Federal Aviation Administration of the United States of America IATA International Air Transport Association IASA International Aviation Safety Assessment (FAA) IBRD International Bank for Reconstruction and Development (WBG) ICAO International Civil Aviation Organization (UN Agency) IDA International Development Association (WBG) IFC International Finance Corporation (WBG) IOSA IATA Operational Safety Audit LCSTR Transport Unit of the Latin America Region (WBG) MIGA Multilateral Investment Guarantee Agency (WBG) MJI Michel J. Iches, Senior Air Transport Economist (WBG) MSSR Monopulse Secondary Surveillance Radar NTSB National Transportation Safety Board (USA) PPIAF Public Private Infrastructure Advisory Facility PPP Public-Private Partnership SAR Search and Rescue (defined by ICAO) SASDT Transport Unit of the South Asia Region (WBG) T/A Technical Assistance TBD To Be Determined TCB Technical Cooperation Bureau (ICAO) TTL Task Team Leader USOAP Universal Safety and Security Oversight Audits Program (ICAO) VOR VHF Omni-directional Radio Range WBG World Bank Group Cover Page: Air transportation continues to grow in West Africa. Compliance with international safety and security standards is essential for the sustainable development of air transport services. The World Bank finances safety and security related infrastructure improvements at Burkina Faso’s main airport in Ouagadougou. FV03MAY10 World Bank Air Transport Annual Report -i- Fiscal Year 2009


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    Table of Contents Foreword ........................................................................................................................................ 1 Executive Summary .................................................................................................................................. 2 The World Bank Group FY09 Air Transport Portfolio ...................................................................... 3 The World Bank Group FY2009 Air Transport Project Locations .................................................. 12 IBRD & IDA Projects............................................................................................................................. 13 Africa Region (AFR) ............................................................................................................................. 13 West & Central Africa Air Transport Projects (P083751 and P100785) ............................... 13 Kenya - Northern Corridor Transport Improvement Project (P082615 & P106200) .............. 14 Sierra Leone – Infrastructure Development Project (P078389) ................................................ 14 Mozambique – Communication Sector Reform Project (P073479) .......................................... 15 Cape Verde – Airline Privatization (P074055) ............................................................................. 16 Latin America & The Caribbean Region (LAC) ................................................................................ 18 Guatemala – PPIAF Study Outcome & Civil Aviation Component (P055084) ........................ 18 South Asia Region (SAR) .................................................................................................................... 19 Pakistan – National Trade Corridor Improvement Policy Loan (P101683) .............................. 19 Middle East & North Africa (MNA)............................................................................................. 20 Egypt – Airports Development Project (P082914 and P105750) ......................................... 20 Egypt – Cairo Airport Development Project TB-2 (P101201) .................................................... 21 Yemen- Air Transport Sector Work (P107026) ............................................................................ 22 East Asia and Pacific (EAP) ................................................................................................................ 23 Tonga – Transport Sector Consolidation Project (P096931) ..................................................... 23 Eastern Europe and Central Asia (ECA) ........................................................................................... 24 Tajikistan-Aviation Sector Reforms (P106963) ............................................................................ 24 International Finance Corporation Projects ..................................................................................... 26 IFC Air Transport Infrastructure Financing (CINTS) ........................................................................ 26 Colombia – Avianca Airline Fleet Renewal .................................................................................. 26 Jamaica – Montego Bay Airport Common Use Terminal Equipment ....................................... 26 Tunisia – TAV SA ............................................................................................................................. 27 Armenia – Armavia........................................................................................................................... 27 Cambodia - Phnom Penh International Airport ............................................................................ 28 Nepal – Buddha Air Private Ltd ...................................................................................................... 28 Jordan – Queen Alia International Airport .................................................................................... 28 Georgia – Tbilisi International Airport ............................................................................................ 29 Chile - Financing LanChile .............................................................................................................. 30 El Salvador - Taca PDP Financing ................................................................................................ 30 Kenya- DAC Aviation ....................................................................................................................... 31 Mexico- Compañía de Aviación ..................................................................................................... 31 Russian Federation- Siberia Airlines ............................................................................................. 32 IFC Advisory Services (CASDR) ........................................................................................................ 32 Multilateral Investment Guarantee Agency ....................................................................................... 36 Peru - Jorge Chavez International Airport (JCIA) ........................................................................ 36 Ecuador – New Airport at Quito ..................................................................................................... 36 External Relations ................................................................................................................................... 37 International Civil Aviation Organization (ICAO) .......................................................................... 37 ICAO - World Bank - ATAG Air Transport Development Forum ............................................... 38 West Africa Workshop of Air Transport Services held in Essaouira, Morocco ....................... 39 Community Service .......................................................................................................................... 39 Internal Dissemination ........................................................................................................................... 40 Air Transport Intranet Site ............................................................................................................... 40 Transport Forum 2009 - Air Transport .......................................................................................... 40 Research and Internal Services ........................................................................................................... 41 A Market Study of Air Freight with Implications for Landlocked Countries .............................. 41 Africa Infrastructure Country Diagnostic (AICD) Study- Air Transport ..................................... 41 Air Carrier Advisory System for World Bank Staff Air Travel ..................................................... 42 Outlook for Fiscal Year 2010 ................................................................................................................ 43 World Bank Air Transport Annual Report - ii - Fiscal Year 2009


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    This page intentionally left blank World Bank Air Transport Annual Report - iii - Fiscal Year 2009


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    Foreword The air transport industry, including infrastructure and service providers as well as air carriers, went through one of its hardest periods in history. After unprecedented rises in fuel costs during FY08, the industry was still far from recovery when it was hit by the global economic depression in FY09 on all market segments. Those, such as business passenger travel and air cargo, depending most on international trade, were the hardest hit, with an impact on revenue even worse than that on traffic volume. Although the industry reacted quickly to lower capacity, most airlines posted huge losses. On the other hand, the destruction of value on financial markets reduced the capital available for investments in aircraft acquisition and infrastructure capacity expansion. This reflected on the volume and structure of the WBG‟s activity in the sector. During FY09, IDA‟s project volume, especially in Africa, increased sizably whereas IFC‟s experienced a sharp decline. The air transport sector is increasingly recognized as an important field in the WBG‟s development activities, in terms of expertise as well as in terms of its economic impact. Although air transport represents a modest part of its portfolio, the WBG is the international development institution devoting by far the largest amount of funding in the sector. Safety and security issues are increasingly recognized of prime significance, especially in developing countries where government and aviation authorities are facing a significant shortage of resources to attain and enforce world-wide oversight standards set by the international community. There is also a growing awareness in the industry about another set of global issues, in relation with its environmental impact and the industry‟s dependency on fossil fuels. The relief brought by the decline in oil prices during FY09 may only be temporary. Consequently, these issues were highlighted by the Copenhagen Conference on climate change. One possible solution to such a fundamental challenge can be developed through the development of alternative fuels, for which more aggressive research efforts are needed. Dr. Charles E. Schlumberger Principal Air Transport Specialist February 2010 World Bank Air Transport Annual Report -1- Fiscal Year 2009


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    Executive Summary The WBG FY09 Air Transport Portfolio includes over 30 projects or project components in all six regions of the IBRD/IDA, as well as 26 active IFC investments and several advisory mandates. The total volume financed by IBRD and IDA loans or grants grew by 30.1% to US$ 690 million, up from US$ 530.4 million in FY08. However, the IFC‟s air transport investment portfolio slightly decreased to US$ 649.7 million from FY08‟s US$ 717.2 million. Overall, the air transport portfolio volume of the WBG increased by 7.4%, to US$ 1.34 billion compared to FY08‟s US$ 1.25 billion. A strong focus of the IDA and IBRD air transport portfolio remains on Africa, where the implementation of the West & Central Africa Air Safety and Security project is underway. Several other projects are implemented in Eastern and Southern Africa, and major aeronautical infrastructure projects for Egypt and the East Africa Community States are in preparation. The implementation of the air traffic management and airport rehabilitation project in Afghanistan and Mozambique were completed, and the first Egypt Airports Development Projects was implemented during FY09. The good development of the IFC’s air transport portfolio in FY08 had been possible thanks to several important new deals. These included the Colombian carrier Avianca, TAV SA (the operator of Monastir and the future Enfidha airports in Tunisia), the Armenian carrier Armavia, Nepal‟s Buddah Air, as well as some advisory mandates for air carriers. The decline in IFC‟s new commitments in FY09 was mainly driven by the postponement of their investment projects by some IFC‟s clients, in response to uncertainties of the economic context. The focus of External Relations continues to be on the collaboration with ICAO, especially in the field of promoting safety and security in the Bank‟s client countries. The WBG, ICAO, and Routes representing the airline industry, have held the 4th Air Transport Development Forum in Kuala Lumpur, Malaysia. Finally, industry relevant research focused on long-term air transport needs, air freight for landlocked countries, as well as on aviation safety, including the establishment of a WBG staff travel advisory service. World Bank Air Transport Annual Report -2- Fiscal Year 2009


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    THE WORLD BANK GROUP FY09 AIR TRANSPORT PORTFOLIO The WBG FY09 air transport portfolio is composed of various lending and technical assistance (ESW) projects in the six regions of the Bank (IDA, IBRD). In addition, the IFC has a current portfolio of proposed and active lending or investment financing throughout the aviation sector. The overview above summarizes the most important projects of the WBG. However, there are currently several smaller projects or project components in various WBG projects that are not included due to their small dimension or their preliminary stage. World Bank Air Transport Annual Report -3- Fiscal Year 2009


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    Africa Region (AFR) WBG Commitment (Million US$) Status as Project Description Product Country Project Full Name of end- ID Code (Aviation Component) Aviation Line Project Total June 2009 Component Safety and Security Transport Sector IDA Tanzania P055120 Equipment, Capacity 250 55 preparation Support Project credit Building Second Central Zanzibar Airport IDA Tanzania P103633 190 17.1 active Transport Corridor Improvement credit Transport Sector Inst. Airport Master Plan, IDA Mauritania P089672 Dev. and Technical Institution Capacity 5.5 2 active credit Assistance Project Building Institution Capacity Burkina IDA West and Central Africa Building, Safety and Faso, grant / P083751 Air Transport Safety & Security Improvements 31.6 31.6 active Cameroon, IDA Security Project at Main International Guinea, Mali credit Airport Burkina Feasibility study of a TA(Non- P114911 Donsin Airport 0.126 0.126 preparation Faso new airport lending) West and Central Africa Inst. Strengthening, Air Transport Safety & Safety and Security IDA Nigeria P100785 43.9 43.9 active Security Project Improvements at Main credit (Phase II) Airports West and Central Africa Benin, Air Transport Safety & Aviation Safety and IDA Mauritania, P108583 2.9 2.9 preparation Security Project Security Improvements credit Senegal (Phase II B) Consultancy Services for Growth and IDA Cape Verde P074055 Restruct. and Privatizing 11.5 1 active Competitiveness Project credit the Nat. Carrier World Bank Air Transport Annual Report -4- Fiscal Year 2009


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    Status as Project Description WBG Commitment Product Country Project Full Name of end- ID Code (Aviation Component) (Million US$) Line June 2009 Aviation Project Total Component Infrastructure Infrastructure IDA Sierra Leone P078389 Rehabilitation at 44 13.8 active Development Project credit Freetown Airport Assessment of Infrastructure IDA Liberia P101456 Emergency Repairs at 8.5 0.6 active Rehabilitation Project credit Robertsfield Airport Technical Assistance, IDA Mali P080935 Growth Support Project Improvements to 55 7.2 active credit Bamako Airport Airport Infrastructure Northern Corridor Improvements, CAA IDA Kenya P082615 Transport Improvement 207 69 active Capacity Building, GNSS credit Project Survey Northern Corridor Cargo Handling at IDA Kenya P106200 Transport Improvement Nairobi Airport, Kenya 253 48.1 active Credit Project (Additional) Airways Privatization Airport Safety and Security Improvements, Transport Infrastructure IDA Madagascar P082806 TA to the Establishment 150 8.3 active Investment Project credit of PPPs in the Airport Sector CAA Capacity Building, Communication Sector IDA Mozambique P073479 Airport Concessioning, 14.9 5.5 closed Reform Project credit Airline Privatization Overview and AICD Air Transport Africa P117313 assessment of air 0.016 0.016 ESW active Sector Review transport sector in Africa World Bank Air Transport Annual Report -5- Fiscal Year 2009


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    Latin America & The Caribbean Region (LAC) WBG Commitment Status as Project Description (Million US$) Product of end- Country Project Full Name ID Code (Aviation Component) Aviation Line June Project Total Component 2009 IBRD Guatemala P055084 Competitiveness Project CAA Capacity Building 20.3 0.4 closed Loan South Asia Region (SAR) WBG Commitment (Million US$) Status as Project Description Product Country Project Full Name of end- ID Code (Aviation Component) Project Aviation Line June 2009 Total Component Economic Reform Nepal P093294 TA to Airline Privatization 3 0.2 TA active Technical Assistance Airport Rehabilitation, Emergency Transport IDA Afghanistan P078284 ATM and CAA Capacity 108 30.3 closed Rehabilitation Project credit Building National Trade Corridor IDA Pakistan P101683 To Be Defined 200 20 preparation Improvement Program credit Trade and Transport Restructuring and Pakistan P101648 3.37 2 active Facilitation II modernization World Bank Air Transport Annual Report -6- Fiscal Year 2009


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    Middle East & North Africa (MNA) WBG Commitment (Million US$) Status as Project Description Product Country Project Full Name of end- ID Code (Aviation Component) Project Aviation Line June 2009 Total Component Bam Earthquake Rehabilitation of Airport IBRD Iran P088060 Emergency 220 4.5 closed Facilities loan Reconstruction Project Additional Terminal Airports Development Buildings at Cairo and IBRD Egypt P082914 363.8 363.8 closed Project Sharm-el-Sheikh Airports, loan Technical Assistance Completion Works to Airports Development IBRD Egypt P105750 Above and Preparation of 40 40 closed Additional Financing loan PPPs Cairo Airport Rehabilitation and IBRD Egypt P101201 Development Project TB- expansion of Terminal 280 280 preparation loan 2 Building 2 Europe & Central Asia (ECA) WBG Commitment (Million US$) Status as Project Description Product Country Project Full Name of end- ID Code (Aviation Component) Project Aviation Line June 2009 Total Component Programmatic Support to a Strategic Set TA Tajikistan P106963 Development Policy 10 2.8 active of Policy Reforms Grant Grant 3 TA(Non- FFS Transport Pulkovo Concession of the lending), Russia P111493 Airport Expansion PPP ST 0.251 0.251 active Pulkovo Airport IDA Petersburg Part 2 credit World Bank Air Transport Annual Report -7- Fiscal Year 2009


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    East Asia & Pacific (EAP) WBG Commitment (Million US$) Status as Project Description Product Country Project Full name of end- ID Code (Aviation Component) Project Aviation Line June 2009 Total component Second Eastern Indonesia Improvements to Local IBRD Indonesia P074290 200 4 active Region Transport Project Airports loan ESW - Measurement of Malaysia P108571 Consultancy 0.02 0.02 TA active Level of Service Provision Tonga Transport Sector Technical Assistance to IDA Tonga P096931 5.4 2.4 active Consolidation Project CAA credit World Bank Air Transport Annual Report -8- Fiscal Year 2009


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    International Finance Corporation (IFC) The IFC, which is specialized at providing financing to private sector companies, has traditionally financed air carriers and airport infrastructure projects. It currently has several projects in a proposed or active status. Country Project Description Amount Type No. Active Projects Fleet expansion of Armavia, Armenia 25002 US$ 11 million IFC Loan Armenia‟s leading carrier. TAM Airlines: pre-delivery payments for the purchase of Rev. Credit and Corp. Brazil 24384 Airbus A-320 family aircraft; US$ 50 million Loan corporate loan to support ongoing operations Gol airline: financing for spare Brazil 24609 US$ 50 million Corp. Loan parts Embraer: Certification of Brazil 22505 US$ 30 million A & B Loans 170/190 model airliners Cambodia Airports II: IFC A Loan up to privatization of Phnom Penh Up to US$ 17.5 US$ 7.5 million, IFC Cambodia 25332 International Airport – required million standby up to US $ capital and investments for 10 million expansion Cambodia Airports: Cambodia 21363 privatization of Phnom Penh US$ 10 million Direct Loan International Airport Lan Chile: Short-term Chile 20177 corporate loan to strengthen US$ 30 million A Loan its working capital position Avianca: Financing of fleet Colombia 25899 US$ 50 million A & C Loans renewal program Aeropuerto Internacional Juan Santamaria: expansion and Costa Rica 9967 US$ 40 million A & B Loans development of airside, terminal and landside facilities Expansion of the immigration and customs areas, the streamlining of duty free Dominican areas, and the addition of new 24951 US$ 33 million A & B Loans Republic passenger boarding bridges, x-ray equipment and air conditioning systems at airports run by Aerodom Renovation and expansion of existing terminal buildings, runways, and aircraft parking areas; construction of new Dominican 22831 terminals; installation of new US$ 60 million A & B Loans Republic security, baggage handling and other equipment; and the construction of a new airport in Samaná Taca: Pre-delivery financing of El Salvador 23882 US$ 30 million Rev. Credit A320 aircraft World Bank Air Transport Annual Report -9- Fiscal Year 2009


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    Georgia 24628 Tbilisi Aiport: privatizaion US$ 27 million A Loan MBJ Phase II - Expansion and Jamaica 24306 redevelopment of Sangster US$ 42 million A & B loans International Airport MBJ Phase I – New landside Split: US$ million 20 terminal and renovation of Jamaica 11353 US$ 45 million IFC A Loan and US$ existing terminal for Sangster 25 million B loan International Airport MBJ (CUTE)- financing for new Common Use Terminal Equipment (CUTE) and Jamaica 26202 US$ 5 million A Loan Baggage Handling and Screening (BHS) systems for Sangster International Airport Bulk of US$ 389 million IFC A Loan US$ 70 Rehabilitation both airside and (US$ 289 million, Syndicated B Jordan 26182 landside of Queen Alia million, IDB loan US$ 175 million, International Airport US$ 100 IFC C US$ 40 million million) DAC Aviation: purchase of Kenya 27688 small aircraft for humanitarian US$ 7 million A loan relief efforts Vuela: Pre-delivery financing Mexico 24672 of up to 20 A-319 aircraft for US$ 30 million Rev. Credit Volaris airline Buddha Air: purchase of Nepal 27247 small aircraft and long term US$ 10 million A loan working capital requirements Airblue Limited: Prepayment Pakistan 25272 US$ 22 million IFC Loan for six Airbus A320 Copa Airlines: Working Panama 21146 US$ 15 million Standby Credit Line Capital Lima Airports Partnership: Financial Restructuring and Peru 24489 US$ 115 TBD assistance in conjunction with Fraport. Air Transport Systems: Russian 24127 Purchase of small aircraft for US$ 15 million C Loan Federation air taxi operation Siberian Airlines: loans to finance acquisition and Russian refurbishment of aircraft, to 20381 US$ 25 million IFC A and C Loans Federation increase its working capital, and to expand its route network TAV Tunisia: construction of a new airport in Enfidha, with an IFC A Loan, initial capacity of 7 million US$ 252.9 Subordinated Loan, Tunisia 26913 passengers a year, and million Syndicated B Loan, rehabilitation of the airport in Equity Monastir World Bank Air Transport Annual Report - 10 - Fiscal Year 2009


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    Pending Projects Pulkovo Airport: finance a concession to expand, Russian 28218 operate and maintain Pulkovo US$ 105 million IFC A and C Loans Federation Airport in St. Petersburg Recently Completed Projects RedMed: Purchase of refurbished aircraft for Star Algeria 24491 US$ 10 million Senior C Loan Aviation subsidiary of oil and mining logistics firm Punta Cana Airport: loan to help finance 2009-10 capital expansion program that Dominican includes construction of new 27883 US$ 20 million A Loan Republic runway, expansion of existing terminal, installation of additional safety equipment; repair of existing runway World Bank Air Transport Annual Report - 11 - Fiscal Year 2009


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    The World Bank Group FY2009 Air Transport Project Locations World Bank Air Transport Annual Report - 12 - Fiscal Year 2009


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    WBG Air Transport Activities at a Glance IBRD & IDA Projects Africa Region (AFR) West & Central Africa Air Transport Projects (P083751 and P100785) Implementation of the West and Central Africa‟s Air Transport Safety and Security Project, which was initiated in FY07 is well underway. Its prime objective is the creation of a safe and secure environment for air transport services in West and Central Africa, which is a precondition for African carriers to access regional and worldwide markets competitively. West and Central African states can individually apply to join the program, which is structured in several tranches, to benefit from its total allocation of US$ 151.50 million. The main outcome targeted for each participating country is reaching full compliance to ICAO safety and security standards by its civil aviation oversight agency, and by its major international airports. This activities and investments in each country vary from capacity building to the procurement of safety and security equipment. However, given the small size of the air transport industry and the limited resources in each country, it is stressed that these goals can only be achieved through regional cooperation, with the establishment of Regional Aviation Safety Bank financed airport security equipment at Oversight Agencies (RASOAs). Ouagadougou International Airport. The Bank‟s project is structured as a horizontal Adaptable Program Lending (APL) enabling any of West and Central African country not included in the initial phase to join during subsequent phases, using the same eligibility criteria. Included in phase I are Burkina Faso, Cameroon, Guinea and Mali, with an overall allocation of US$ 33.57million. Phase II of the Program was initiated in FY08, with Nigeria‟s participation in the program for an amount of US$ 46.65 million. The pace of project implementation has clearly improved in FY09, with many infrastructure components being implemented. Nevertheless, progress in CAA capacity-building, especially through regional cooperation by establishing RASOAs based on the sub-regional economic communities, remains slow. Several additional countries of West and Central Africa are planning to join Phase II of the APL. The Phase II-B of the project, consisting of Benin, Mauritania, and Senegal, has passed Bank Board approval and has become effective as of August 2009. Contact person is Pierre A. Pozzo di Borgo at ppozzodiborgo@worldbank.org World Bank Air Transport Annual Report - 13 - Fiscal Year 2009


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    Kenya - Northern Corridor Transport Improvement Project (P082615 & P106200) This Bank project in Kenya, which began in 2003, represents the first major air transport infrastructure and regulatory capacity building project in Africa. So far, good progress was achieved in implementing the various components of the project, which is divided into two main parts: (i) support to the Kenya Airports Authority (KAA) for airport infrastructure improvements, and (ii) support to the Kenya Civil Aviation Authority (KCAA) for regulatory capacity building and specific investments in navigation aids and training equipment. In FY 2009, a revision of the original Project Development Objectives was made in response to major changes in aviation sector compared to that prevailing at the time of appraisal of the project in early 2004. Notable changes included a high growth in passenger flows due to the sudden upturn in the economy and the strong performance of Kenya Airways especially in the segment of long-haul traffic connecting at Nairobi between African countries and Asia. This situation was calling for the expansion of terminal facilities at Jomo Kenyatta International Airport (JKIA) to handle international and domestic traffic to the year 2021. In Bank‟s support to KCAA, the objective of achieving International Aviation Safety Assessment (IASA) Category 1 certification for KCAA has well progressed with the achievement of key milestones including the enactment of the Kenya Civil Aviation‟s regulations. In December 2008, ICAO conducted an audit and no major adverse findings were noted. It was concluded that KCAA, is to a large extent, complying with ICAO Standards and Recommended Practices (SARP). Nevertheless, despite that, there were remarkable improvements in recruiting key professional staff, the staffing levels remain inadequate and a Good progress made in regulatory oversight by number of the inspectors in place still lack the Kenyan authorities may soon lead to being requisite skills to provide safety surveillance certified FAA IASA category 1. required by ICAO. On 2 April 2009, an additional credit of US$253 million was approved by the Bank‟s Board of Executive Directors for Kenya‟s Northern Corridor Transport Improvement Project. One component of this project will help financing the constructing of a new passenger terminal at Jomo Kenyatta International Airport. Contact person is Anil Bhandari at abhandari@worldbank.org Sierra Leone – Infrastructure Development Project (P078389) The Infrastructure Development Project in Sierra Leone seeks to rehabilitate selected priority roads, port, and airport facilities in Sierra Leone. In addition, it is supporting regulatory and institutional reforms, which include the effective management of the country's road, port, and airport sectors. The project‟s third component is the Freetown International Airport infrastructure and its management. This includes the rehabilitation and strengthening of the runway, with the upgrading of turning loops and taxiway entrances in order to safely accommodate modern aircraft. In addition, it finances the installation and upgrading of water and electricity facilities which are necessary for handling, security, sanitation, and fire fighting and rescue operations. Furthermore, the navigation installation and tower equipment need to be replaced, and operational training for airport employees will be financed. Finally, the project also aims at World Bank Air Transport Annual Report - 14 - Fiscal Year 2009


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    increasing efficiency and competitiveness of the Sierra Leone Airports Authority (SLAA). The fourth project component, project coordination, also includes an aviation element, which is the development of a master plan for the international airport. ETWTR provided technical advice in the preparation of design and bidding documents for the airport infrastructure rehabilitation. However, all sub-components are still in different phases of the procurement stage. As of the end of FY09, overall disbursement rate on the project was at 31%. Contact person is Kavita Sethi at ksethi@worldbank.org Mozambique – Communication Sector Reform Project (P073479) The air transport component of the Bank‟s Communication Sector Reform project for Mozambique continued its implementation until the closing of the project at the end of FY09. The three subcomponents included the financing of the airport infrastructure, the restructuring of the national airline LAM, and the strengthening of the Civil Aviation Authority. The Government of Mozambique (GoM) had initially considered various alternatives of private sector participation in airport infrastructure, but eventually abandoned the proposed granting of a concession for Maputo International Airport (MIA) to Airports Company South Africa (ACSA). Consequently, the Bank assisted the GoM in preparing an alternative financing concept for the air transport infrastructure system. The conclusion of a Bank- financed study was that it would be possible to set-up a financially self-supporting entity consisting of Maputo Airport, nine secondary airports, and the ATC system, whereas major investments, such as a new terminal building, would be difficult to carry out without private sector financing. On the basis of the findings of this study, and in view of the various funding Pilots of the national carrier LAM are sources, the Mozambique Airport Agency (ADM) increasingly using the Bank financed GNSS has prepared a new outline finance and approaches, which has significantly improved investment program to be discussed with the operational safety and dramatically lowered fuel Bank. A detailed investment proposal is being consumption given far fewer diversions in bad weather to alternative airports. prepared by ADM for consideration by the Bank. The restructuring of the national air carrier LAM had been identified early on as a prerequisite to a successful privatization, but as the project was being implemented, the restructuring that was supposed to include a large retrenchment plan never fully took place. Instead, LAM, which experienced a number of managerial changes, downsized softly to a smaller labor force (from 800 staff to 695 in 2009), initiated cost reductions, and invested in information technologies (e.g. electronic ticketing). In parallel, it launched a fleet renewal programme, which is funded by commercial loans. LAM acquired several smaller aircraft that are more economical and better adapted to Mozambique. LAM‟s strategy is to concentrate on its strength as a national and regional carrier with more point to point connections, resulting in less stopovers and higher frequencies in order to prepare for the liberalization of the Johannesburg-Maputo line, planned for October 2009. With regard to the MIA concession, the government entered long negotiations with ACSA, which were aborted in 2007. The GoM considered that the contract terms were not advantageous enough, and the WB agreed with this view. Subsequently, the project funded a study, which examined various strategic World Bank Air Transport Annual Report - 15 - Fiscal Year 2009


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    options to secure funding to insure the long-term sustainability of the airport system in Mozambique. Nevertheless, the GoM signed a financing agreement with Chinese commercial banks and the Export-Import Bank for the construction of a new airport in Maputo. In parallel, the GoM also agreed with the Danish International Development Agency (DANIDA) for support to upgrade three regional airports, which includes re-pavement of runways, repair of perimeter fencing, and the installation of new visual aids. The strengthening of the Civil Aviation Authority (IACM) has also well progressed. IACM management and staff are carrying out the responsibilities of regulatory safety and security oversight, and the implementation of the new regulatory framework has been done. Finally, the development of RNAV non-precision approaches (GNSS approaches) for eight selected airports in the country has been completed by the approval and publication of the GNSS approaches. The new approaches have not only greatly enhanced operational safety, but, according to LAM, also result in continuous large fuel savings as their aircraft are mostly able to land in bad weather thus avoiding costly diversions. Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org Cape Verde – Airline Privatization (P074055) The Bank (AFTTR & ETWTR) continued the supervision of the Privatization and Regulatory Capacity Building Project in Cape Verde, which includes the consultancy for the restructuring and privatization of the national airline TACV. The Bank supported the objective of the Government of Cape Verde to privatize TACV with technical assistance. It was understood that the carrier could develop a much more dynamic role if owned and managed by the private sector. However, the privatization of air carriers remains a challenging task. This is especially true in the case of TACV, as the carrier must also preserve its role of assuring a public service linking the various islands. During a mission of the Bank in mid-2009, the project review has shown that credit proceeds are no longer available to support privatization activities of this state-owned airline. Nevertheless, the carrier has recently modernized its fleet with two ATR 72-500 turboprop aircraft. Contact person is Kavita Sethi at ksethi@worldbank.org Tanzania – Airport and Air Traffic Control Infrastructure (P055120) During FY09, the preparation of the Airport and Air Traffic Control Infrastructure component of the Transport Sector Support Project was continued by AFTTR with support of ETWTR. The concept review of the project was conducted in June 2009 and the estimated dates for the project decision meeting and board approval will be mid FY10. The airports infrastructure rehabilitation may include runway surfacing and other investments for one or more of the following airports: Tabora, Kigoma, Bukoba, Shinyanga, Sumbawanga, Mafia, and/or Arusha. Tanzania has an unusually high number of unpaved or partially paved airports receiving regularly scheduled service. Several of the airports listed above fall in this category. The exact scope of the project is currently still under consideration, but it is considered that with perhaps additional external financing up to three of the airports above may be significantly improved. Contact person is Dieter E. Schelling at dschelling@worldbank.org World Bank Air Transport Annual Report - 16 - Fiscal Year 2009


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    Eastern Africa Regional Aviation Project (P112210) The Bank (AFTTR & ETWTR) continued the preparation of a Regional Air Transport Safety and Security Project for the East Africa Community (Tanzania, Uganda, Kenya, Rwanda, and Burundi). In May 2009, the Bank team conducted an identification mission to Kenya, Uganda, Tanzania, Burundi, and Rwanda. It met with the respective authorities to (i) reach an agreement with the participating countries on the development objectives of the project and the main issues of the safety, security and regional integration, (ii) identify core areas of support including required actions following the recent ICAO audit findings and recommendations, and (iii) identify the country‟s primary institutions and teams that will be responsible for project preparation and later implementation. The components of the EAC regional aviation project may include funding for (i) institutional development and capacity building (support for EAC aviation training schools, institutional development and restructuring of EAC Civil Aviation Authorities, and quality management system for the aeronautical meteorological services in the EAC region), (ii) enhancing airworthiness inspection services (support of the Full liberalization of air traffic within the EAC newly established regional Civil Aviation Safety is essential for the development of air and Security Oversight Agency (CASSOA) to build transport. Domestic carriers, such as Precision the necessary capacity), (iii) upgrading of aviation Air, will play an important role in the region. infrastructure (financing of a pilot ADS-B system in Tanzania, and of additional GNSS-based procedures in the EAC, support the harmonization of the upper flight information region, and upgrade strategic airport runways in the region), (iv) supporting the liberalization of air transport (foster the implementation of the Yamoussoukro Decision), and (v) aviation security enhancements at key airports (finance capacity building, and the procurement and installation of appropriate security equipment). The overall objective of the project will be the deepening of regional integration within the EAC, by fostering the development of air services within the community, and strengthen CASSOA. However, further inquiries and assessments will be conducted in FY10 in order to determine the overall scope and composition of this regional aviation project. Contact person is Solomon Muhuthu Waithaka at swaithaka@worldbank.org World Bank Air Transport Annual Report - 17 - Fiscal Year 2009


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    Latin America & The Caribbean Region (LAC) Guatemala – PPIAF Study Outcome & Civil Aviation Component (P055084) While the country had an Open Skies agreement with the U.S. since 1992, it remained rated category 2 in the Federal Aviation Administration IASA program. This meant that only non- Guatemalan operators, such as U.S. carriers or TACA, could respond to the increased demand for Guatemala‟s air travel with the U.S. The Bank supported the implementation of the necessary regulatory framework and capacity building at the Civil Aviation Authority by allocating US$ 400,000 of the Competitiveness and Growth Project. In addition, the Bank had set the IASA category 1 certification as an indicator for strengthening infrastructure in the Broad-Band Growth Development Policy Loan of US$ 100 million. ETWTR (CES) had supervised this component since 2004. In June 2007 the US DOT granted the FAA IASA category 1 to Guatemala, which allowed for direct flights to the US and Europe out of the airport of Aurora. There are now 10 international airlines operating around 240 weekly flights into Guatemala, 80 of which are operated by American companies. A large share of the American tourists use the airport as entry point, and passenger and cargo transport has become more competitive. The second major improvement of Guatemala‟s air transport sector is the progress made in the upgrade of the existing infrastructure of the country's main airports. The current strategy was a policy recommendation of a Public-Private Infrastructure Advisory Facility (PPIAF) financed study and workshop held in 2004. The GoG had initiated a well planned The new terminal of Guatemala’s main airport, La infrastructure improvement program, which Aurora, has been completed, and is fully operational. followed the recommendations of the PPIAF, which aimed at renovating the existing airport. The Bank's cost estimate for the construction at Guatemala City (La Aurora) airport was over US$ 300 million. The GoG current investment at La Aurora was budgeted at US$ 124 million. The Technical Cooperation Bureau of ICAO is contracted to supervise procurement and execution of the construction. The new terminal, as well as the main apron, has been completed during FY08 at an estimated cost of US$ 100 million. The displacement of the main taxiway, and the relocation of all general aviation hangars on the East side, are still pending. The overall program plans to invest about US$ 135.8 million overall in six airports (La Aurora US $124 million, San José US$ 3 million, Tikal-Mundo Maya US$ 3 million, San Marcos US$ 0.9 million, Huehuetenango US$ 0.9 million, and Quetzaltenango US$ 4 million). Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org World Bank Air Transport Annual Report - 18 - Fiscal Year 2009


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    South Asia Region (SAR) Pakistan – National Trade Corridor Improvement Policy Loan (P101683) The preparation of the new transport project in Pakistan, called National Trade Corridor Improvement Program (NTCIP), was continued by the Bank (SASDT&ETWTR) in FY09. The prime objective is to enhance Pakistan‟s export competitiveness and foster industrialization. The Government of Pakistan (GoP) aims at achieving this objective through a comprehensive multi-sector reform and investment program, which should streamline procedures, improve services, and upgrade its physical infrastructure. The scope of the current program includes railways, the road transport industry, ports and shipping activities, trade facilitation, highways, and civil aviation. The overall investment program in Pakistan‟s transport infrastructure is estimated at about US$ 10 billion, of which 7% are needed in the air transport sector. The project amount of the NTCIP is US$ 300 million, which could be granted as a development policy loan (DPL). In February 2009, a preparatory mission by ETWTR (CES) reviewed the civil aviation sector of the country, which consists of (i) the domestic and international air transport market, (ii) sector policy, (iii) CAA regulatory oversight, (iv) airport infrastructure, (v) air traffic control infrastructure, and (vi) the national carrier Pakistan International Airlines (PIA). The conclusion was that the aviation sector in Pakistan played a significant role, both for domestic and international traffic. Domestic traffic, especially significant on the North – South Axis of over 1,500km, is not developing and international traffic seems to significantly lag behind. Nevertheless, the country has a long and strong aviation tradition, which was marked by its national carrier Pakistan The national carrier PIA dominates the country’s air International Airlines (PIA). transport sector, especially on international routes. The CAA, which enjoys near absolute financial autonomy given its strong financial income, seems to have fallen behind in regard to its regulatory oversight obligations, and instead focused on commercial development. Overall, the aviation sector lacks of a clear vision for its future development, and investments are made in a quite opportunistic way. Finally, the national carrier PIA has become a major financial liability for the country. Furthermore, during FY09, the economic crisis started to reflect on the volume of activity in some Gulf countries. The most conspicuous impact has been the recent collapse of major real estate developers in Dubai, which brought several ongoing projects to a standstill. This resulted in the loss of jobs by scores of Pakistani engineers, managerial staff, technicians and workers. While the Gulf economies will recover, the current situation is posing a threat to the development of the important migrant workers‟ segment of air services to and from Pakistan. To address the identified developmental issues, a civil aviation component for the National Trade and Transport Facilitation Project was recommended, which would include the following elements: (i) development of Air Transport Masterplan for Pakistan by analyzing and reviewing several related topics, and (ii) air safety improvement component, which aims at immediately improving operational safety by financing several GNSS based instrument approaches, and assessing the regulatory oversight by the CAA in view of the upcoming ICAO audit of 2010. The Bank project preparation will continue in FY10. Contact person is Charles E. Schlumberger at cschlumberger@Worldbank.org World Bank Air Transport Annual Report - 19 - Fiscal Year 2009


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    Middle East & North Africa (MNA) Egypt – Airports Development Project (P082914 and P105750) The Airport Development Project (ADP) in Egypt was completed by the end of FY 09. Under this project the Government of Egypt received a total of US$ 335 million of IBRD financing (plus an additional financing of US$ 40 million) for the construction of the third terminal at Cairo International Airport (“CAI” with investments of US$ 285 million), the new terminal at Sharm El Sheikh Airport (“SSH”, with investments of US$ 42 million), and consultancy services for both airports at about US$ 8 million. The outcome of the project‟s three components is considered to be highly satisfactory. The component 1, the construction of Terminal Building 3 (“TB3”), has more than doubled the capacity of CAI with a new capacity of 11 million passengers annually. The total built up area is 209,274 m2, including the associated buildings which are the power plant, sewage plant, water tank of 18,000 m3 and apron control tower. The terminal is equipped with advanced IT system, and latest technology in baggage handling system. The project meets the ICAO standards as well as Egyptian seismic codes. Inaugurated on 18 December 2008, the terminal was partially opened for traffic in April 2009 for a ramp up period which ended later in July 2009, with The new terminal TB3 is recognized as a modern and efficient all Egypt air flights and its partners in airport infrastructure handling up to 11 million passengers. Star Alliance moved to TB3. The component 2, the construction of the new terminal building in Sharm El Sheikh Airport, which can accommodate 4.5 million passengers per year, is bringing the capacity of SSH airport to a total of 7 million passengers. The first domestic flight landed on 16 April 2007 under a trial period and the official inauguration took place on 24 May 2007 with the full opening to commercial flights on 11 June 2007. The component 3 has as objective the strengthening of sector operations and environmental management. In accordance with the project liberalization study, the following measures were taken: (i) international charter flights are permitted to all Egyptian airports, (ii) competition law was introduced which provides protection and prevents monopoly, (iii) 40 licenses are awarded for passenger transport and 5 licenses are awarded for cargo transport, (iv) gradual liberalization is ongoing with 25 bilateral agreements signed and negotiations ongoing for 42 additional agreements, and (v) pricing policy of airports fees was modified and the Civil Aviation law of 1981 was amended. In terms of airport management capacity building, the following results were achieved: (i) the Egyptian Holding Company for Airport and Air Navigation and its subsidiaries‟ organization charts are improved, (ii) human resources procedures manual and bylaws as well as the payroll rates of employees are revised, and, (iii) the average salaries have increased 269 percent since 2003. Furthermore, the studies on the national strategy of developing air cargo, the national airport master plan, and the environment management review were also completed as planned. Contact person is Michel Bellier at mbellier@worldbank.org World Bank Air Transport Annual Report - 20 - Fiscal Year 2009


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    Egypt – Cairo Airport Development Project TB-2 (P101201) The Cairo Airport Development Project Terminal Building 2 (“TB-2”) was initiated by the Bank in order to assist the Government of Egypt in enhancing the quality of air transport services in Egypt by increasing the traffic-handling capacities at Cairo Airport, and by strengthening Egypt‟s air transport in the context of international competition. CAI is the largest airport in Egypt and the second largest in Africa after Johannesburg in South Africa. It has experienced solid growth of air traffic during the past years, and further growth is expected in the coming years. CAI, being a geographically well defined facility, is primarily viewed as having a significant local impact, playing a significant role in the country‟s economic development. However, as any major airport that acts as a regional hub, it is also strongly exposed to international competition, which must be faced to maintain and further develop its privileged position. On the one hand, CAI is a key element of a chain of services required and developed by the tourism industry, the manufacturing industries, and by export- oriented agricultural specialties productions. It therefore contributes to a very large extent to the competitiveness of these industries on an international level. On the other hand, as competition between alternative routings has become an increasingly important factor in the World‟s global air transport context, the efficiency (quality of service versus connection costs) of a connecting airport has become a key factor of competitiveness of carriers based at, or serving, such an airport. Egypt‟s flag carrier EgyptAir successfully develops its „sixth freedom‟ strategy, with a growing presence on the markets between the African continent and overseas destinations in Asia, the Middle-East, Europe and North America (e.g. Morocco-India or Eastern Africa-USA). For this, key factors such as a reliable baggage transfers system, a strong overall on-time performance record, and facilitation of connecting passenger‟s processing and screening services, have become critical elements of EgyptAir‟s attractiveness in comparison with its main international competitors (e.g. European or Gulf countries carriers). EgyptAir‟s home base, CAI, plays therefore a very important role in the carrier‟s successful development of air transport services The planned TB-2 project comprises two components with an estimated total cost Artist’s view of the new terminal building 2 at CAI. of US$453 million, of which US$280 million are financed by an IBRD loan, and US$173 million are financed by direct funding from the Cairo Airport Company and by a domestic loan. At the end of FY09, project evaluation was underway, and the Bank set a target date for Board approval in the second half of FY10. Contact person is Michel Bellier at mbellier@worldbank.org World Bank Air Transport Annual Report - 21 - Fiscal Year 2009


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    Yemen- Air Transport Sector Work (P107026) On request of the Government of Yemen (GoY), a World Bank mission composed by Jean- Charles Crochet (MNSTR) and CES visited Yemen in October 2008 to carry out a sector review of the air transportation of the country. The primary objectives were to improve the understanding of the GoY, the Bank, and the donor community of main air transport issues in Yemen, and to identify key practical measures that should be implemented as a priority, possibly funded by donors in order to improve the efficiency of the sector. The mission presented its findings at a workshop in Yemen, and discussed them with the stakeholders, such as the airlines, the airports, and the air navigation service provider of the country. The conclusion of the mission was that the Government of Yemen had recognized that the air transport sector plays an important role for the development of the country. It had supported its flag carrier Yemenia to become a respected international operator, and at the same time it introduced some competition by allowing a new operator to serve domestic and some regional routes. It also created an effective civil aviation authority, which complies to a large extent with international standards for regulatory oversight. Finally, the air transport infrastructure was well developed during recent years, and can generally be considered adequate for existing and near future air traffic. The major developmental issue concerning the sector is the fact that neither its long-term infrastructure development strategy nor the financing aspects of the sector are based on a comprehensive sector planning. The lack of planning, and the virtual absence of financial transparency, bears the risk that certain infrastructure projects are far beyond required dimensions such as the new outline and terminal building of Sana‟a International Airport). In addition, the national carrier still enjoys certain advantages that may distort competition, and some financial or technological alternatives are not yet, such as developing private participation in The GoY recently granted an air operators certificate to the new infrastructure, and introducing domestic operator Felix Airways, which plans to serve its domestic and GNSS-based navigation and regional markets with primarily regional jets. surveillance systems. Several detailed recommendations were given to the Ministry of Transport, and it was proposed that a rigorous analysis and planning exercise for the air transport sector be initiated. Such an assessment should review and evaluate existing infrastructure, outline the financial needs for development, and forecast financial income based on realistic passenger and cargo forecast. As of the end of FY09, the dialogue with the GoY was still on-going on this proposal. Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org. World Bank Air Transport Annual Report - 22 - Fiscal Year 2009


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    East Asia and Pacific (EAP) Tonga – Transport Sector Consolidation Project (P096931) The Government of Tonga has successfully restructured the Ministry of Civil Aviation, with T/A provided by the Bank. Among other measures, the regulatory functions were separated from operational ones with the creation of a separate corporation, the Tonga Airways Limited (TAL), in July 2007. During the early phase of TAL, there was need for technical assistance in several operational, administrative and related areas. The Bank was working with the government and other donors to identify these needs, and to coordinate the provision of assistance to help consolidate TAL‟s operations, making it a strong and self-sustaining entity. While it was subsequently decided to drop the T/A project, the also planned Transport Sector Consolidated Project went ahead. The objective of the new project is to establish and consolidate the operations of the newly created Ministry of Transport as a unified transport sector policy, planning and regulatory ministry, and to improve the level of compliance of the civil aviation and maritime sub-sector entities with international safety and security standards. In February 2008, ETWTR (CES) conducted a mission to Tonga to assess the proposed investments in the civil aviation sector. A detailed technical note on the air transport sector of Tonga was prepared, which gave an assessment, and recommendations for the proposed IDF grant of US$ 2.5 million for the sector. The mission recommended some urgent technical improvements, such as the replacement of an old VOR, as well as the procurement of new fire and crash vehicles. In addition, capacity building programs and the preparation of a comprehensive Air Transport Master Plan for Tonga, will be financed by the grant. The project was cleared following the quality enhancement review, and has been approved by the Board in the very first days of FY09. Implementation is well underway. Some procurement issues were raised by some unsuccessful bidders that had not been fully Some of the fire and crash vehicles at Tonga’s resolved as of FY09 end. main airport did not comply with international Contact person is Charles E. Schlumberger at standards and needed to be replaced. cschlumberger@worldbank.org World Bank Air Transport Annual Report - 23 - Fiscal Year 2009


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    Eastern Europe and Central Asia (ECA) Tajikistan-Aviation Sector Reforms (P106963) The Programmatic Development Policy Grants (PDPG) I, II and III have been implemented by the WBG for Tajikistan with an objective to increase access to the land-locked country. Over the long run, the reforms of its aviation sector aim at creating the foundation for more competitive, efficient, reliable, and safe aviation services. To achieve the objectives, the operation supported wide-ranging reforms of aviation sector. These included the separation of the policy making function from technical regulation and accident investigation, with the aim of increasing the transparency and performance of these functions. It also involved unbundling Tajik State Airlines to create several new companies, one to operate the state owned airline, one to operate air traffic control, and four to operate the nation‟s airports. These measures are reflected as prior actions in each of the three PDPG operations. As of fiscal year 2009, the recipient country government has satisfactorily implemented the restructuring of the aviation industry in terms of the separation of airport, airline and air traffic control functions in accordance with the agreed program. The observed outcome of the project, is that the number of passengers traveling through the international airport in Dushanbe has been rising steadily since 2004 as indicated by the table below. In addition, the number of flights and of airlines operating regularly scheduled flights to Dushanbe also rose significantly. However, the costs and convenience of air travel are still far worse in Tajik Air (Tajikistan Airlines) is the national airline of the Tajikistan than in most countries in former Soviet republic of Tajikistan. It needed to be the region. One reason is that reorganized to face competition following deregulation of the government still imposes significant aviation sector. restrictions on foreign airlines wishing to serve the country, which must be interpreted as to limit competition with the state-owned carrier as well as with newly established domestic private operators. Table: Access to Tajikistan by air 2004 2006 2007 2008 2009 Passengers, Dushanbe 557,000 878,000 1,197,000 1,350,000 N/A Flights per week, Dushanbe 67 103 110 101 175 Destinations served from Dushanbe N/A N/A 11* 19 22 Source: Tajikistan Ministry of Transport (* Includes only destinations served by Tajik Air.) World Bank Air Transport Annual Report - 24 - Fiscal Year 2009


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    The upcoming projects, PDPG 4, 5 and 6, include prior actions to further promote the objectives for the aviation sector, are anticipated to board in June 2010. PDPG 4 includes adoption of an aviation sector policy, PDPG 5 and 6 will include reforms specified in an action plan, which is currently being discussed with the government. Contact person is Roy Sudharshan Canagarajah at scanagarajah@worldbank.org Russia- Technical Assistance to Pulkovo Airport (P111493) St Petersburg is the second largest city in Russia, in terms of its population (six million in the city and surrounding area), economic and political relevance. Serving this major city is Pulkovo International Airport, the fourth largest airport in Russia. The City of St Petersburg recognizes that Pulkovo Airport is operationally and developmentally constrained by the positioning of its two terminals and airside facilities. An airport master plan was commissioned in 2005 and completed in 2007, which outlined what development would be required in line with traffic forecasts. It was further decided that the development of the airport, including a new combined international and domestic terminal, should be undertaken via a Public Private Partnership (PPP). The World Bank (joint effort of ECSSD and FEU) was designated to act as strategic adviser to the City of St Petersburg on the concession of the Pulkovo Airport. The PPP project is expected to attract more than 1 billion EUR in private investment for the refurbishing and expansion of the existing international airport. The concession agreement was signed later in October 2009 and financial close is expected to take place during the first half of 2010. Contact person is Vickram Cuttaree at Proposed upgrade and expansion of Pulkovo Airport. vcuttaree@worldbank.org World Bank Air Transport Annual Report - 25 - Fiscal Year 2009


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    International Finance Corporation Projects IFC Air Transport Infrastructure Financing (CINTS) Colombia – Avianca Airline Fleet Renewal Avianca, the oldest existing airline of the Americas, has currently a fleet of 62 aircraft and operates 49 domestic and international routes. Within Colombia, it provides services to regions which would hardly be served by land transport because of the difficult topography and large distances. Air transport is therefore an essential tool providing both, domestic and international air transportation, which has become a key factor of the development of industry and tourism in Colombia. Avianca transports approximately 10 million passengers per year. The airline has embarked in an investment plan for replacing its older MD-83 and B757/767 aircraft with new and more fuel-efficient aircraft types (A319 and B787), able to better compete on the market and deliver better service to customers. The company has negotiated the purchase of 42 new aircraft over the next five years. The investment plan also comprises the procurement of spare engines and spare parts, as well as training costs related to the fleet renewal program. The new Airbus 319 and A320 are the currently During FY09, IFC responded to the carrier‟s available aircraft for Avianca’s fleet renewal program, request to support Avianca‟s fleet renewal which will reduce operating cost and increase program with a US$ 50 million financing competitiveness. In addition, about 12 Boeing 787 are facility, which was agreed upon in the first on order to serve the long-haul markets. months of FY09. Jamaica – Montego Bay Airport Common Use Terminal Equipment Montego Bay‟s Sangster International Airport serves the North-West coast of Jamaica, where most resorts are located. It is the island‟s main gateway for tourism traffic. The airport is operated by MBJ Airports Limited under a 30-year build-operate-transfer concession granted by the Airports Authority of Jamaica in 2003. The IFC had already provided financing to MBJ Airports Ltd for the expansion and upgrading of the terminal building, bringing its capacity to five million passengers per annum. The current project, which was considered in FY08, provided the airport with new Common Use Terminal Equipment, a concept which increases the flexibility of the check-in system, and improves the interface between ground handling services, airline passenger handling, and the airport operator. The project also comprises a new baggage handling and screening system. The combination of the two components offers a significant improvement of the airport‟s systemic operational efficiency, thus enabling the facilities to absorb higher traffic volumes with a better quality of service. It is estimated that the annual capacity will be brought to seven million passengers, eliminating capacity constraints for the foreseeable future. The IFC‟s financing consists of an A-loan of US$ 5 million, approved in December 2007. World Bank Air Transport Annual Report - 26 - Fiscal Year 2009


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    Tunisia – TAV SA Tunisia‟s existing airports have recorded strong growth of their traffic over the recent years, and some are facing severe congestion. More growth is expected as a result of planned tourism and manufacturing developments, and of the outcome of the current negotiations for an open skies agreement with the European Union. In 2007, the Government of Tunisia granted a concession to TAV, a Turkish company headquartered in Istanbul, specializing in airport operation and management, to operate the existing Monastir Airport, and to build, finance, and operate a new airport at Enfidha, with an initial annual capacity of 7 million, and ample space for future expansion (5,788 Ha). The site is located halfway between Hammamet and Sousse, so as to serve both the Hammamet- Nabeul tourist complex and the Sousse-Monastir area, which combines manufacturing industries and tourism resorts. The existing Monastir airport cannot be expanded on site, whereas Hammamet is currently served through Tunis-Carthage airport, i.e. a land access route of nearly 90 km and requiring crossing the congested Tunis metropolitan area. The future Enfidha airport will thus help relieve congestion at Tunis-Carthage. In addition, Enfidha is located in a region of intensive agricultural production, and the new airport will provide opportunities to airfreight agricultural exports. Finally, the airport will be in the immediate vicinity of Enfidha‟s industrial zone, a 2 million square meters area earmarked for the development of an industrial zone aiming at attracting investors and companies of the automotive sector. The total project cost is estimated at 565 million EUR (approximately US$ 700 million, which makes it one of the largest private sector investments in Tunisia), financed through a 30% equity contribution from the sponsor, and 70% through debt. IFC‟s investment, approved in FY08, was for a financing package of €398 million, including direct long-term senior and subordinated loans of €135 million and a €263 million syndicated loan, underwritten by ABN, Société Générale, and Standard Bank. In FY 09, IFC provided €30 million in equity as substitution for part of the original IFC A loan exposure. Armenia – Armavia Armavia is the leading carrier in Armenia. It started commercial operations in 2001 with flights to Moscow and Istanbul. The company plans to expand its fleet and to improve the level of its safety and service standards. As part of this expansion program, the company plans to lease western aircraft to service more routes and increase frequency in existing routes. Armavia is owned 100% by Mika Limited, which is owned by a prominent businessman who is a Russian citizen of Armenian descent. The carrier Armavia has developed a network of currently operates 6 Airbus A319/320, and recently destinations from its hub serving began operating a leased CRJ-200LR. primarily Western and Central Europe. The IFC project comprises a corporate loan of up to US$ 11 million (IFC Loan) to Armavia for leasing seven aircraft in total (replacing two existing, fuel-inefficient Yak aircraft, and adding five more) to expand its present fleet. Also, the company will spend about US$ 2 to 3 million for general corporate purposes, including hiring of two directors (one each for commercial and finance), install a revenue management system, and implement the recommendations of the IFC consultant on organizational restructuring, safety, and training of pilots and staff. World Bank Air Transport Annual Report - 27 - Fiscal Year 2009


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    Cambodia - Phnom Penh International Airport Phnom Penh Pochentong International Airport (PPIA) serves as the main gateway to Cambodia, while Siem Reap International Airport (SRIA) mainly caters to the tourist traffic visiting the various Angkor temples located in the nearby Angkor Archeological Park, a UNESCO World Heritage site. Sihanoukville was established in the 1950s and forms, together with Phnom Penh and Siem Reap, one of the destinations that has been identified by the Royal Government of Cambodia (RGC) as cornerstones for the country‟s short-term tourism development. The Sihanoukville airport, located 15 km from the city center, was built in the 1960's and remains a small airport with limited facilities. The concession for the development and operation of Sihanoukville Airport was awarded by the RGC in March 2006 to Société Concessionnaire de l‟Aéroport (SCA), which is 70% controlled by France‟s Vinci Group and 30% by a Malaysian investment holding company, and a Cambodian engineering company. In 2004, the IFC had already provided a US$ 10 million loan to SCA to support capital expenditures at PPIA and SRIA. A new project was initiated in 2006, consisting of a terminal extension at Phnom Penh, and infrastructure upgrading at Sihanoukville and Siem Reap, for a total cost of US$ 40 million. During FY07, the IFC provided a US$ 7.5 million A-loan, and US$ 10 million in a standby loan. During FY08, the IFC investment programme was being implemented. Nepal – Buddha Air Private Ltd Buddha Air Private Limited (BAPL) started operations in Nepal in 1997. The company currently owns and operates five 1900D Beech aircraft and two 1900C Beech aircraft, each with capacity to seat 18 passengers. The company focuses on scheduled passenger flights between the capital, Kathmandu and the regional airports as well as mountain flights (flights over the Himalayan range for tourists). The company plans to purchase ATR42-300s, Buddha Air is operating a fleet of modern and also to construct an aircraft hangar. The Beechcraft 1900D turboprop aircraft, which purchase of the aircraft will help BAPL meet the comply with the FAA's stringent turbine engine rotor burst requirements. anticipated increase in passenger demand and provide the company with an alternative in the absence of leased planes from the aircraft company. In FY 09, IFC approved a US$ 10 million corporate loan to the project. Jordan – Queen Alia International Airport In FY07, the Government of Jordan (GoJ) tasked the IFC with an advisory mandate for the concession of Queen Alia International Airport (QAIA) of Amman. The contract was subsequently awarded in May 2007 to a consortium including the international airport operator Aéroport de Paris Management, and the international construction firm J&P Overseas. The 25-year concession includes the expansion, rehabilitation, and operation of the airport. The consortium constituted Airport International Group P.S.C (AIG), a special purpose company which will act as the concessionaire. World Bank Air Transport Annual Report - 28 - Fiscal Year 2009


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    The concession agreement grants AIG the exclusive right and obligation to provide airport services at QAIA, and charge tariffs for these services. Such services include the obligation for AIG to operate, maintain, and rehabilitate the existing Airport‟s landside and airside facilities; complete the design for, engineer, procure, finance, and build a new passenger terminal; and submit and implement a plan to demolish the existing terminal at QAIA once the new terminal is fully operational. AIG has requested both the IFC and the Islamic Development Bank (IDB) to provide financing for the project, which is expected to cost US$ 680 million and includes the rehabilitation of the existing terminal, the construction of the new terminal including related aprons and external works, and the demolition of the existing building. The construction of the new terminal is expected to be completed in July 2011. The project is being financed by a combination of internal cash flow generation (US$ 134 million), equity (US$ 161 million), senior debt (US$ 347 million), and a subordinated loan (US$ 40 million). The senior debt would be provided by both the IFC and the IDB, while the subordinated loan would only be financed by IFC. The proposed investment by the IFC was approved in FY08. Georgia – Tbilisi International Airport TAV Urban Georgia LLC (TAV Georgia) holds an 11.5-year concession (starting January 2006) from the Tbilisi International Airport Joint Stock Company to design, finance, construct, maintain, and operate the Tbilisi International Airport (TIA). TAV Georgia has the option to extent the concession by an additional five years by designing, constructing and financing, but not operating, the upgrade of the Batumi International Airport for US$ 15 million. Anticipated continued growth in traffic at TIA has created the need for substantial upgrading and expansion of the airport facilities, to allow the airports to operate at international standards of safety and efficiency, and to support Georgia‟s continued economic progress. The project is expected to cost US$ 76.5 million, which includes US$ 51.5 million for the construction of a new international terminal and car park, widening of the runway, extension of the apron and taxiways, and upgrade of emergency response services at TIA. In addition, US$ 4 million for The modern terminal of Tbilisi airport was designed to acquisition of ground handling equipment handle well expected future passenger growth. at Tbilisi Airport, and US$ 15 million for the construction works and modernization of equipment and systems at Batumi International Airport, will be invested, next to working capital requirements, insurance, and financing costs. The total project costs are US$ 76.5 million. The IFC signed a loan in May 2006 for a proposed investment consisting in an A loan of up to US$ 27 million for IFC‟s own account. The European Bank for Reconstruction and Development will provide a parallel loan of the same amount along with the IFC. During FY08, the investment programme continued to be implemented. World Bank Air Transport Annual Report - 29 - Fiscal Year 2009


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    Chile - Financing LanChile Together with its subsidiary and associate companies including Lan Peru and Lan Ecuador, LanChile is a leading provider of domestic and international passenger and cargo air services in Latin America. Currently, LanChile operates 46 passenger aircraft and 10 cargo freighters. The company is a member of Oneworld, one of the major global airlines alliances, and has code share agreements with several other airlines. Through its cargo services, LanChile contributes significantly to the region‟s trade and economic development. It enables the export of perishable products including seafood, flowers and fruits from Chile, Ecuador, Colombia and other countries in the region while facilitating the import of high value products such as computers, cellular phones and vehicle spare parts into Latin America. The proposed IFC investment will be a 3-year credit line of US$ 30 million to strengthen the long-term working capital position of LanChile. Through the proposed investment, IFC will be providing financing at a time when the global airline industry, and particularly the Latin American airlines, is going through unprecedented difficulties resulting from the economic crisis in Argentina and the general global economic slowdown that has also affected the region. El Salvador - Taca PDP Financing The investment in this carrier is an IFC revolving credit facility of US$ 30 million to Grupo Taca for the benefit of Taca International Airlines S.A. (Central American international airline headquartered in San Salvador, El Salvador), and other members of Grupo Taca (Taca). The Facility will be used for pre-delivery payments (PDPs) towards the purchase of Airbus A-320 family aircraft (which include A-319s, A-320s and A- 321s). Taca currently operates 111 daily flights to 35 destinations in 19 countries, serving its passenger base in North America, Central America and South America, from its hubs at San Salvador (El TACA is operating 47 aircraft, primarily of the Salvador), San Jose (Costa Rica) and Lima Airbus A319/320 series. The airline has been IATA (Peru), respectively. The project is part of an IOSA certified, and its crews fully meet international standards and requirements. ongoing fleet modernization program that Taca began in 2000, resulting in a current average age of 3.3 years for Taca‟s fleet. The IFC revolving credit facility is for US$ 30 million and will remain in existence for approximately five and a half years, (i.e., up to October 2010). However, the maturity of each aircraft PDP loan is two years as each aircraft PDP loan is fully repaid upon delivery of the aircraft. IFC‟s investment in the project would help establish the necessary financing from an international lending source in the form of a committed facility to help Taca finance certain aircraft pre-delivery payments and complete its expansion plans. World Bank Air Transport Annual Report - 30 - Fiscal Year 2009


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    Kenya- DAC Aviation The DAC Group (“DAC” or the “Group”) provides air charter services for the World Food Program (“WFP”) in Sudan and for the European Commission Humanitarian Aid Office (“ECHO”) in the Democratic Republic of Congo (“DRC”) in support of the humanitarian relief operations of these organizations. Trident Enterprises Ltd. (“TEL”), a subsidiary of DAC, is the asset holding company of the Group. TEL leases aircraft to a sister company of the Group, CMC Aviation (“CMC”) which has hangars and facilities at Nairobi‟s Wilson Airport. Increased demand for passenger capacity by WFP has created an opportunity to purchase one 76-seater Bombardier Dash 8 Q400 aircraft to the Nairobi-based fleet. Extraordinarily poor and unsafe road networks and highly inadequate rail transport systems have made it difficult, if not impossible for humanitarian aid organizations to get aid effectively to where it is most needed. In addition, in conflict-ridden regions such as Eastern DRC and DRC/Southern Sudan, organizations like WFP and ECHO have resorted to using air transportation for the movement of people and sometimes cargo in the region. Even though roads may exist in some areas, air transportation provides safety and efficiency, as well as quick response capabilities to these organizations in emergency situations. The project has a high development impact as it supports a private airline company in Kenya, an IDA country which The newly acquired Bombardier Dash 8 Q400 aircraft can operate from difficult services humanitarian relief terrain, such as from rural airstrips as seen here. organizations in other IDA countries where they are critically needed. The greatest impact of the project is that it allows some of the World‟s leading humanitarian organizations deliver aid where it is most needed. Mexico- Compañía de Aviación Volaris is part of the commercial brand of the Mexican group Concesionaria Vuela Compañía de Aviación S.A. de C.V., a low-cost airline. It is the third largest and the fastest-growing Mexican airline, after Aeromexico and Mexicana. The investment in this airline includes an US$ 30 million IFC revolving credit line for the financing of pre delivery payments of 16 Airbus A319 aircraft and a US$ 10 million loan to Controladora Vuela Compañia de Aviación, S.A de C.V. (Controladora) with Concesionaria Vuela Compañia de Aviación, S.A de C.V. as the guarantor (Vuela or the Company), a newly established low cost airline, branded as Volaris. The company‟s main line of business will be passenger air transportation mainly within Mexico. Vuela commenced operations on March 13, 2006. It will initially operate five routes with four aircraft throughout Mexico from its base at Aeropuerto Internacional de Toluca. By year five of operations, the Company plans to operate over 20 Airbus A319 aircraft and serving over 30 routes. Vuela will provide substantially discounted fares in a market historically marked by limited competition and high fares. This will stimulate demand and make air transportation accessible for a larger share of the Mexican population, while promoting connectivity and economic growth. World Bank Air Transport Annual Report - 31 - Fiscal Year 2009


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    Russian Federation- Siberia Airlines Siberia Airlines was created in 1992 as a result of the reorganization of government-owned Aeroflot, and thereafter privatized in 1994. Siberia Airlines is currently Russia's fastest growing airline and recently passed Aeroflot as Russia‟s leading domestic airline. The carrier operates scheduled passenger flights to Russian destinations, as well as international services to Armenia, Austria, Azerbaijan, Bulgaria, China, Egypt, Germany, Ireland, Israel, Kazakhstan, Kyrgyzstan, Moldova, Montenegro, South Korea, Spain, Tajikistan, Thailand, Turkey, Turkmenistan, Uzbekistan, Ukraine and the United Arab Emirates. Its main bases and hubs are Domodedovo International Airport (DME), Moscow and Tolmachevo Airport (OVB), Novosibirsk, with a further hub at Irkutsk International Airport (IKT), Irkutsk. Its domestic routes network is the largest in Russia. The IFC project involves a corporate loan of up to US$ 25 million to refinance the existing short and medium-term loans of the company with the longer-term facilities. The company used these loans to finance acquisition and refurbishment of aircraft, to increase its working capital, and to expand its route network. IFC investment will demonstrate the viability of investments in the air transportation sector in Russia and play a catalytic role in attracting more foreign investments into this sector. IFC‟s investment will send a positive signal to prospective foreign investors and give the company necessary exposure to international financial markets and technical partners. Contact person for all IFC air transport investment projects is Ravinder Bugga at rbugga@ifc.org, and for IFC transport strategy is Brian Casabianca at bcasabianca@ifc.org. IFC Advisory Services (CASDR) Air Transport Advisory Mandates The Infrastructure Advisory Services Department of the IFC provides advisory assistance to governments on structuring and implementing (tendering) Public-Private-Partnerships (PPPs) in infrastructure. IFC has undertaken more than 100 advisory transactions in over 67 countries over the last 20 years. IFC/World Bank's reputation for competence, transparency, and fairness allows it to play the role of neutral partner to balance each party's interest, thus reassuring foreign investors, local partners, other creditors, and government authorities The two main domains in air transportation advisory services are private sector participation in airports and air carriers. 1) IFC Public-Private Partnerships (PPP) Advisory Mandates in Airports Only 2% of the world‟s 10,000 commercial airports are managed or owned by the private sector. However, as passengers carried by air transport has exceeded 2 billion since 2005, and that same year, 40% of all merchandise and goods (in value) were air freighted – Public- Private-Partnerships (PPPs) in airport infrastructure will continue to accelerate in order to meet investment and required service standards. In addition, airport PPPs are useful approaches to meet both private and public sectors objectives. World Bank Air Transport Annual Report - 32 - Fiscal Year 2009


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    Of the various airport PPPs models available, concessions and full divestiture are most effective:  Concession Contracts (BOT, BOO, BOOT, BTO, etc.): State retains ownership of airport but transfers investment as well as operations and management responsibilities to the private sector  Full Divestiture: Ownership, operations, and investment responsibilities are fully transferred to the private sector  In certain cases, a blend of first-phase BOT followed by public offering can maximize benefits 2) IFC Public-Private Partnerships (PPP) Advisory Mandates in Airlines The airline industry has followed this privatization path. In the last 20 years, IFC has worked on nearly a dozen airline transactions. Unfortunately, many have proved to be difficult projects due to important sector-specific structural reasons:  Fixed-cost structure: Airlines tend to build up a legacy-costs base (staff and fleet) that is difficult for a new owner to manage. In addition, fuel costs are beyond management‟s control, and during the recent oil price spike they accounted for as much as 30 percent of the cost base.  Price-sensitive product: Demand for travel is extremely elastic, especially in tourist markets. In recessions, people forgo vacations for other consumer goods. Conversely, price reductions increase passenger numbers dramatically.  Complicated demand chain: Customers often purchase tickets through travel agents, frequently in a package with hotel accommodations. Since airlines rely on these other actors for their sales, if there are bottlenecks elsewhere the aviation sector will suffer.  Overregulation: Bilateral agreements between governments, still prevalent in many parts of the world, prevent competition from functioning normally. Open skies are being adopted, but not in all countries. Selected IFC Advisory Mandates in Airports Project Name Country Year Mandate / Result Maldives Airports Maldives 2009 Ongoing privatization Haiti Airports Haiti 2007 Cancelled by Government Concession to Aeroports de Queen Alia Airport Jordan 2007 Paris consortium Concession to Saudi Bin Hajj Terminal Saudi Arabia 2007 Laden Group Awarded to Abuja Gateway Nigeria Airports Nigeria 2006 Consortium (Airport Authority + equity partners) World Bank Air Transport Annual Report - 33 - Fiscal Year 2009


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    Selected IFC Advisory Mandates in Airlines Project Name Country Year Mandate / Result Awarded to Caribbean Air Jamaica Jamaica 2009 Airlines Drukair Buthan 2008 Strategic analysis Air Vanuatu Vanuatu 2007 Ongoing privatization Cancelled by Government Rwandair Express Rwanda 2006 at post bidding stage JAT Yugoslavia 2006 Strategic analysis Polynesian Airlines Samoa 2005 49% sold to Virgin Blue Cameroon Airlines Cameroon 2005 Cancelled by Government Cancelled, no market Air Botswana Botswana 2003 interest Air Tanzania Tanzania 2002 49% sold to SAA Nigeria Airways Nigeria 2002 Strategic analysis Middle-East Airlines Lebanon 2001 Cancelled after 9/11 76% sold to KLM, financial Kenya Airways Kenya 1996 investors Affretair (cargo) Zimbabwe 1994 Strategic analysis Air Lanka Sri Lanka 1992 Strategic analysis World Bank Air Transport Annual Report - 34 - Fiscal Year 2009


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    3) IFC Air Transportation Experience When undertaking a transaction advisory mandate, IFC provides a one-stop solution to governments involving all aspects of the proposed mandate. One of the distinguished features of IFC‟s value addition is its ability to balance private and public sector interests and take into account sustainable long term economic and social effects. IFC Advisory Projects: Example of Jamaica - Privatization of Air Jamaica Air Jamaica is the national airline of Jamaica. In 2007, Air Jamaica operated scheduled services from Kingston and Montego Bay to over 20 destinations in the USA, the Caribbean and Canada and carried 1.7 million passengers, making it the leader in the Jamaican aviation market with a 44% market share. Its main base is Norman Manley International Airport, Kingston with a second hub located at Donald Sangster International Airport, Montego Bay. In March 2008, IFC was appointed as the lead advisor of the Government of Jamaica for the structuring and implementation of a privatization strategy for Air Jamaica. The first objective of the privatization project was to ensure the long term, sustainable development of Air Jamaica, through a partnership between the Government and a private sector investor who had adequate technical expertise and financial strength and who would implement a sound business The fleet of Air Jamaica includes seven Airbus A-320s, one A-321, and one A-319. plan for Air Jamaica‟s future. The second objective was to effect the removal of Air Jamaica from the national budget (as of end June, 2009, Air Jamaica‟s financial statements showed an accumulated deficit of US$1.4 billion). From March to October 2008, IFC assisted the Government of Jamaica in assessing the Company‟s situation and recommended several actions for the immediate improvement of its operational and financial performance. From October 2008 to January 2010, IFC implemented an international bidding process which resulted in the submission of two bids in June 2009. After the eventual termination of the negotiations with the initial winning bidder, the Project was re-awarded to the second bidder Caribbean Airlines – the national airline of Trinidad and Tobago - later in January 2010. Contact person for IFC air transport advisory services is Rostan Schwab at rschwab@ifc.org World Bank Air Transport Annual Report - 35 - Fiscal Year 2009


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    Multilateral Investment Guarantee Agency The Multilateral Investment Guarantee Agency (MIGA) guarantees cover projects in a broad range of sectors, with projects in infrastructure accounting for the largest share (41 percent) of the agency‟s outstanding portfolio. Infrastructure development is an important priority for MIGA, given the estimated need for US$ 230 billion a year solely for new investment (maintenance needs are of a similar magnitude), to deal with the rapidly growing urban centers and underserved rural populations in developing countries. Two recent example projects of MIGA guarantees are Jorge Chavez International Airport project at Peru, and New Airport project at Quito, Ecuador. Peru - Jorge Chavez International Airport (JCIA) MIGA has provided Fraport AG, of Germany, with a guarantee for US$ 11.5 million, to cover its US$ 12.8 million counter guarantee for a performance bond posted for the privatization of Lima's airport, Jorge Chavez International Airport (JCIA). The coverage is against the risk of expropriation (the wrongful call of the performance bond), and extends for eight years. The airport privatization is considered by the government as a key factor in the expansion of employment opportunities, the creation of a modern transportation facility to serve as Peru's gateway to the world, and for the enhancement of tourism, an industry that the government is actively trying to expand. During the first four years of the concession, the consortium is expected to invest more than US$130 million in new infrastructure, including upgrades to the current terminal, construction of a new passenger concourse, expansion and addition of new aircraft aprons and taxiways, and creation of a hotel and world-class retail center within the existing airport perimeter. Ecuador – New Airport at Quito MIGA issued three guarantees of US$ 32.8 million, US$ 16.4 million, and US$ 16.4 million to the Aecon Group INC. of Canada, the HAS Development Corporation of the United States, and ADC Management Ltd. of the United Kingdom for their respective shareholder loans to Corporacion Quiport of Ecuador. In addition, MIGA also issued guarantees of US$ 450,000, US$ 225,000, and US$ 225,000 for the investors' respective equity investments in the project enterprise. The Aecon Group and HAS Development Corporation have coverage for a period of fourteen years for their shareholder loans while the remaining four guarantees are for a period for fifteen years. Each guarantee provides coverage against the risks of Transfer Restriction, War and Civil Disturbance, and Breach of Contract. The project involves the construction of a new airport near Puembo, 24 km. outside the capital city of Quito. The project will be a key economic driver for sustainable economic development of the metropolitan region of Quito. The airport is expected to be operational by early 2008 to replace the existing airport in the city of Quito, which suffers from safety deficiencies as well as capacity constraints. Contact person for MIGA guarantees is Margaret A. Walsh at mwalsh@worldbank.org. World Bank Air Transport Annual Report - 36 - Fiscal Year 2009


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    External Relations International Civil Aviation Organization (ICAO) The Bank and ICAO enjoy a long-standing strong relationship on various matters concerning air transport. On safety and security, the Bank has been working since 2006 with ICAO on the implementation and supervision of safety and security projects in West and Central Africa. To support ICAO, but also to benefit from its technical knowledge, the Bank is financing special on demand safety and security audits done by ICAO specialists. Involving ICAO for the supervision of these projects is in fact cheaper and more accurate than employing regular consultants. In addition, ICAO helps the Bank in identifying needs and priorities in air transport at client various countries. The Bank also has started to work with the Air Transport Bureau of ICAO on environmental matters, and has increasingly become involved in issues concerning aviation and climate change. This field promises to become significantly more important in view of the aviation industry‟s objective to respond to the challenge to reduce CO2 emissions. The Bank plans to deepen its research and cooperation on climate change with ICAO in FY10. For more effective support to developing countries, the Bank and ICAO have developed a web-based project databank, which will contain all planned and ongoing air transport projects that are supported by donors. The system, called AvDeCo, was implemented after extensive discussions with several potential participants and donors. However, while the Bank and ICAO have vividly provided content, information from other donors have only been received after special requests. Nevertheless, the Bank and ICAO will continue to implement this coordination mechanism in order to better support client countries. The Bank also participated during FY09 in several conferences and international meetings organized by ICAO. One important event this year was the Conference on the Economics of Airport and Air Navigation Services (CEANS) which took place in Montreal in September 2008. The key elements of the conference and policy revision were economic oversight, economic performance and minimum reporting requirements, and user consultation. In addition to the review of these substantive points, CEANS identified a lack of consistent compliance with ICAO policies on user charges by Member States as a critical issue that needs to be tackled. The conference therefore adopted a recommendation that States should be encouraged to adopt the four principles of the established policy (non-discrimination, cost- relatedness, transparency and consultation with users) into national legislation or regulation, and/or to include them in air service agreements. The conclusions of the conferences were summarized in ICAO Doc 9082, which as such is not binding for Member States. However, it draws its legitimacy from the binding principle of non-discrimination codified in Article 15 of the Chicago Convention. The Bank is referring to these principles in policy advice to clients. Finally, the Bank continued to participate on the Steering Committee of the AFI Comprehensive Implementation Programme (ACIP). ACIP, which was developed to address the concerns expressed by the ICAO Council on the safety status of aircraft operations in Africa, aims at strengthening African civil aviation authorities with respect to their safety oversight capabilities. The outcome should be an increased compliance with ICAO SARPs and industry‟s best practice. ACIP performs country based gap analysis, and provides training to increase the number of qualified personnel at the industry and oversight levels. It further aims to enhance regional cooperation, and to improve capacity of regional and sub- regional safety oversight systems. The Bank cannot directly support ACIP with funding. However, it continuously examines if ACIP could benefit from Bank projects in Africa. Contact person is Charles Schlumberger at cschlumberger@worldbank.org World Bank Air Transport Annual Report - 37 - Fiscal Year 2009


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    ICAO - World Bank - ATAG Air Transport Development Forum The fourth Air Transport Development Forum co-organized by the World Bank, ICAO and the industry's Air Transport Action Group (ATAG) was held on 14th and 15th October 2008 in the International Convention Centre, Kuala Lumpur, Malaysia, in collaboration with the 14th World Route Development Forum. With the theme of Maximizing Civil Aviation’s Contribution to Global Development, the topics of this year‟s forum were focused on five themes: (i) air transport as economic catalyst in the Asia region, (ii) the fuel challenge, (iii) market access and infrastructure, (iv) safety and security, and (v) funding and resource mobilization in Asia. The World Bank Group participated as a technical partner in the forum. CES co-organized the forum and moderated the panel addressing funding and resource mobilization for civil aviation. The Bank also gave a technical presentation on the status of liberalization of air transport services among the ASEAN (Association of Southeast Asian Nations) countries. Pierre Pozzo di Borgo gave an overview on air transport project funding by the World Bank. The key points of the forum‟s conclusions were:  Air transport industry as an economic catalyst, plays an important role in facilitating passenger transportation as well as goods movement. The recent soar of fuel price raised the operating cost of the airline industry. Combined with slow or even negative demand growth, it may lead to the restructuring of the airline industry and collapse of many airlines.  The fuel challenge is an alert for the air transport industry both economically and environmentally. Instead of imposing surcharges on consumers as strategy for the rising fuel cost, panelists suggest that airlines should prudently ensure the rights of the consumers by maintaining essential traditional services with efficient operation.  Efforts to achieve multilateral liberalization in the Asia-Pacific region have been made by the ASEAN, however, many ambitious declarations are not implemented promptly. Even the U.S. government strongly supported Open Sky air service, which aims at eliminating restrictions on airline routes, fares, and designation, still includes limits on national ownership and control on domestic markets. The emphasis of the aviation infrastructure must be placed on development of new technologies.  Proper communication, organization and harmonization among government, industry service providers as well as the financial institutions must be conducted to achieve aviation safety and security. Response to pandemic preparedness was achieved through Cooperative Agreement for the Prevention of the Spread of Communicable Diseases through air travel.  Funding and resources for civil aviation are traditionally from the governments and private sectors in the Asia-Pacific region. Meanwhile, the International Financial Facility for Aviation Safety (IFFAS) of ICAO, the World Bank Group, and the Asia Development Bank has been providing funding for air transport projects in the region as well. Finally, lack of technical and managerial skills confronting the rapid expansion of air service can be alleviated by undertaking the ACI-ICAO Airport Management Professional Accreditation Program (AMPAP) training courses. The ICAO World Bank team concluded that the set-up of the Forum with the Routes organization has great organizational advantages. The next World Routes event was planned in Beijing, China, on 14th and 15th September 2009. During FY09, the Bank‟s ETWTR staff was active in the preparation of the Beijing meeting. Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org World Bank Air Transport Annual Report - 38 - Fiscal Year 2009


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    West Africa Workshop of Air Transport Services held in Essaouira, Morocco On invitation of the Ministry of Transport of Morocco (MoT) and of Royal Air Maroc (RAM) CES participated on 15 May 2009 as speaker in the Colloque des Ministres Africains de Transport, where current issues of the air transport sector were discussed. In the presence of various Ministers of Transport, Head of Civil Aviation Authorities, and other institutions of West African states several topics were elaborated. These topics included the economic challenges of the air transport sector, its liberalization in Europe and in Africa, and various air transport policy issues. CES presented and discussed his findings on the implementation of the Yamoussoukro Decision. He outlined how Morocco, which is not a member state of the decision, was able to establish a liberalized air transport regime with many other African States by agreeing on liberalized bilateral air service agreements. In addition, Morocco benefits from an Open Skies agreement with Europe, which resulted in strong growth in traffic that includes an important sixth freedom portion with sub-Saharan Africa. Finally, the mission discussed with the MoT the possibility of developing an air transport capacity building component to strengthen the CAA of Morocco. A follow-up on this issue was coordinated internally at the Bank. Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org Community Service Several staff at the Bank are licensed and active pilots, certificated by the US FAA and / or European Aviation Authorities EASA. In order to remain current on their pilot‟s qualifications, they regularly fly and undergo required refresher training. The most rewarding way of maintaining currency is to provide community service by providing free air transportation to people of all ages whose medical needs – evaluation, diagnosis, and treatment – can only be met by health care facilities far from their hometowns. In the US, the not-for-profit organization Angel Flight provides timely travel to patients who can't withstand traveling long distances by automobile, rail, or bus, and who do not have the financial means to purchase suitable alternative transportation. In addition, transport in smaller private aircraft can better accommodate those patients whose condition could worsen if exposed to the re-circulated air on commercial flights, and who need efficient point-to-point transport. One example of such an Angel Flight Mission was a flight from the Washington DC area to La Guardia, New York, in April 2009 to transport the Kammer family to a cancer treatment appointment. The flight was conducted by CES and Dr. Brian Turrisi. They both bore all cost for the mission. The Bank‟s contribution, in Five year old cancer patient Dallon and his mother accordance to Staff Manual 9.10, consisted of Sonya Kammer relax during the flight from Manassas, one day administrative leave to carry out this VA, to La Guardia, NY. rewarding community service. For more information visit www.angelflighteast.org World Bank Air Transport Annual Report - 39 - Fiscal Year 2009


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    Internal Dissemination Air Transport Intranet Site The prime tool for continued internal dissemination of air transport relevant information is the Bank air transport intranet site. The site was developed during FY05, and continuously enhanced with new reports, studies, and aviation news. The site contains eleven directories with numerous subdirectories, links to internal and external sites, as well as a frequently asked question and feedback section. The Bank air transport intranet site continues to be regularly updated with new documents. In addition, an informative external website, which contains the public information of the intranet site, was further enhanced in FY09. The external website (www.worldbank.org/airtransport) continues to be an important reference for external development partners for air transport related projects. Nevertheless, the internal and external web sites are scheduled to be entirely redesigned and redeployed during FY10 in order to meet the new Bank-wide web strategy. Contact person is Diyun Wang at dwang3@worldbank.org Transport Forum 2009 - Air Transport The air transport session of the Bank‟s Transport Forum 2009 was held on 31 March 2009 with the theme of Building Capacity and Infrastructure for Growth. The session reviewed Bank financed airport infrastructure projects and acquired updates from the US FAA on environmental issues and air transport. CES introduced air transport‟s long history within the World Bank, including a loan in 1952 to KLM Royal Dutch Airlines, and also the current portfolio of the Bank‟s air transport projects. Michel Bellier, Lead Transport Specialist, MENA, described the project of Terminal 3 in Cairo, Terminal 2 in Sharm el Sheikh, and the additional strengthening of the sector over all through measures such as master plan development, capacity building, and liberalization. Solomon M. Waithaka, Senior Highway Engineer at Sub-Saharan Africa region, introduced the air transport component of the Northern Corridor Improvement Project in Kenya. Ms. Folasade Odutola, Director of the Air Transport Bureau, ICAO, and chair of the panel, spoke of the long and close cooperation between the World Bank and ICAO, and also one of its achievements - the IDAP (AvDeCo) database, as an on-going effort to coordinate assistance projects. Carl Burleson, Director, Office of Environment and Energy at the FAA, spoke on meeting the environmental and energy challenges potentially constraining the otherwise historically strong growth of the sector. The focus was on the global challenges as well as those met in the U.S. Significant strides have been made in the U.S. in terms of technology, both in aircraft the development of NextGen airspace and traffic management. The conclusion of the section forum is that the continuation of the global economic crisis should not hinder the development of sustainable air transport infrastructure and capacity, since otherwise the lack of those would impose a constriction in growth. Infrastructure must be designed, built, and managed with an expectation of a reasonable return on investments. There is a clear need for development organizations, such as the World Bank, to invest in these projects and coordinate in international collaboration. Contact person is Charles E. Schlumberger at cschlumberger@worldbank.org World Bank Air Transport Annual Report - 40 - Fiscal Year 2009


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    Research and Internal Services A Market Study of Air Freight with Implications for Landlocked Countries During FY09, Bank‟s Transport Sector Board published the transport paper Air Freight: A Market Study with Implications for Landlocked Countries. The paper is a study looking at the opportunities and constraints for trade integration and export development in developing countries. A principal finding is the fact that one of the factors limiting the volume of airfreight in developing countries is the lack of significant volumes of two-way activity. To facilitate air freight, landlocked countries need to improve operations at their airports and liberalize access for foreign airlines. However, until those countries become major exporters, it is unlikely that scheduled air cargo operators will have significant operations. Instead, most air cargo will move goods as belly cargo on passenger airlines, with some complementary use of chartered air freighters during shipment peaks. Landlocked countries should therefore provide greater access to foreign passenger airlines. The study can be downloaded at Contact person is Jean François Arvis at jarvis1@worldbank.org www.worldbank.org/airtransport Africa Infrastructure Country Diagnostic (AICD) Study- Air Transport A Bank study concluded that Africa‟s air transport infrastructure is not at the heart of the sector‟s problems: the number of airports is stable, and there are enough runways to handle existing traffic. However, what is required is better scheduling and relatively modest investment in parallel taxiways and a few new terminal facilities. Safety continues to be a problem, however: while aircraft are generally not unsafe, pilot capabilities and safety administration are lacking and air traffic control facilities are poor. Revenues from airports and air traffic are substantial enough to finance necessary improvements but are not currently captured by the sector. Lack of transparency in financial transactions between the actors of the system (the states‟ treasury, civil aviation agencies, airport authorities, and airport operators) is common in most African countries. This lack of transparency is further aggravated by the lack of reliable traffic statistics and even basic traffic recording, thus making it virtually impossible to reconcile figures between traffic records and airport revenue. In an effort to inform the ongoing debate over Africa‟s infrastructure requirements, the AICD report seeks to provide a more complete inventory of air transport capabilities than was previously available. It focuses on industry organization within Africa, overall accessibility, and the quality of oversight and infrastructure installations countrywide and at selected airports with a range of capacities. In addition to data collected from questionnaires sent directly to the civil aviation authorities (CAAs) in each country, the report relies on the interpretation of data collected through a variety of other sources - especially from the providers of flight schedules to global reservation systems - to ensure that its analysis of trends is independent and unbiased. The report An Unsteady Course: Challenges to Growth in Africa’s Air Transport Industry was published in FY09. Contact person is Vivien Foster at vfoster@worldbank.org World Bank Air Transport Annual Report - 41 - Fiscal Year 2009


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    Air Carrier Advisory System for World Bank Staff Air Travel The Bank has been developing an evaluation tool for assessment of the risk associated to air travel for Bank staff since FY08, and the system is ready for launch. The development and maintenance of the system has been carried out by ETWTR, in cooperation with the World Bank General Service Department (GSD). During FY09, the team further deepened research on carrier safety, and an enhanced internal air travel safety advisory service was developed. The advisory service will be based on a system with three general safety categories of airlines. The ratings of the system are based on the following rationales: Category Description Recommendation 1 All airlines that are industry Good to fly. The Bank has no objection to using certified by having passed these airlines. an IATA IOSA audit, unless subsequent safety experience indicates a safety problem. 2 All airlines that though they Good to fly. The Bank has no objection to using are not industry certified these airlines. are either licensed by a country with an FAA IASA rating of Category 1, or are known to the Bank as safe carriers. 3 All airlines that are not in 3a. Good to fly. Airlines considered satisfactory by (1) or (2) above, or are on ETWTR. The Bank has no objection to using these any blacklists, or are airlines. deemed to be unsafe for 3b. Avoid if possible. Airlines that have elevated other reasons. risk. These airlines have had no accidents in recent years but some factors are below the standards of 3a airlines. They are deemed acceptable to travel, but the choice is given to staff with the recommendation to look for alternatives if possible. 3c. Avoid at all cost. Airlines that are considered high risk. Do not fly unless in mission critical emergency situations. Staffs maintain the right of choice and are not banned from using these airlines. Overall there were 155,091 flights booked by American Express for Bank Staff in FY 2009. Most of the flights booked by Bank staff are with airlines that considered to be Good to fly. Less than one percent (1,064 flights) of the flights were on airlines considered category 3, and flights on airlines deemed as unsafe is less than 0.33%. ETWTR will continue to provide ongoing assessments and safety advice for air travel of Bank staff. It will also establish an incident reporting system, which will allow responding quickly with a new assessment when a carrier seems to develop serious safety issues. The airline safety staff advisory service will be launched in 2010. Contact person is Diyun Wang at dwang3@worldbank.org World Bank Air Transport Annual Report - 42 - Fiscal Year 2009


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    Outlook for Fiscal Year 2010 Financing of Air Transport related Projects The global air transport sector continues to endure its worst crisis ever, which has also impacted this sector in developing countries. Declining passenger figures in all segments (premium and economy class) has created huge losses for the industry worldwide. Several carriers went into bankruptcy, and a significant number were liquidated. Nevertheless, global trade and many service industries, such as the tourism sector, continue to depend on reliable and safe air transport services. However, the serious difficulties of the financial sector, triggering bailout interventions in many developed countries, will have a lasting impact on the availability to provide financing to the air transport sector. Aviation is generally considered a high risk industry, and developing countries are especially challenged as they themselves represent a higher risk for financing. Behind this background, the WBG will continue to provide financing to sustainable air transport projects in client countries. As required investments in airport and air traffic infrastructure have become more difficult to be financed by the private sector, the Bank will play an increasingly important role in addressing these needs. However, next to financing infrastructure, technical and policy improvements must be further implemented. For example, new technologies, such as satellite based surveillance systems (e.g. ADS-B) and navigation aids (e.g. GNSS approaches), promise to become standard infrastructure components in Bank projects. In terms of policy, the Bank will continue to foster liberalization and regional integration of air transport services, especially in countries that do not have a sufficiently large market to operate a national carrier. Finally, regulatory oversight to enforce compliance with international safety and security standards remains a key objective in many client countries. The Bank will continue to provide funding for the establishing of a functioning oversight authority, and finance capacity building. However, sustainability and demonstrated political will to enforce safety oversight will condition Bank financing. The private sector of the air transport industry will continue to have access to funding by IFC. However, as IFC is conditioning its credit decision on commercial criteria, a further slowdown of new IFC projects is expected in FY10. Nevertheless, sustainable financing projects of airlines or airports will be considered favorably, especially given the fact that access to private financing for these sectors in developing countries has become extremely difficult to obtain in many parts of the world. Research and Publications The Bank, as a leading development institution, will continue to maintain high standards in its specialized technical sectors by maintaining research, conducting high level technical exchanges, and fostering specific industry contacts. One of the most challenging realities is the growing concern over the effects of air transportation on the environment, especially on climate change, as well as increasing concerns about the long-term availability of fossil fuel based energy. The Bank will research air transportation, environmental challenges, and energy during FY10 in a research project called Air Transport and Energy. In addition, given the special focus on Africa during the past years, the research on liberalization of air services in Africa, The Implementation of the Yamoussoukro Decision, will be published in FY10 as World Bank book under the title Open Skies for Africa. The publication will serve to underline policy advice in Africa and in other parts of the world. World Bank Air Transport Annual Report - 43 - Fiscal Year 2009


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    Energy, Transport and Water Department The World Bank Group 1818 H Street, NW Washington, DC 20433 USA www.worldbank.org/transport


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