As Kenya’s aviation industry evolves, regulatory and infrastructural developments shape the sector’s potential. Recent initiatives by the Kenya Civil Aviation Authority (KCAA) and the Kenya Airports Authority (KAA) demonstrate a strong commitment to aligning Kenya’s aviation framework with international standards. This commitment aims to address growing demands for modernized infrastructure, sustainable operations and enhanced connectivity between local and global supply chains. However, challenges persist, particularly for international lessors and financiers facing higher perceived risks in leasing aircraft within the region.
Key developments in Kenya’s aviation sector
Legislative overhaul for civil aviation
The introduction of the Draft Civil Aviation Bill, 2024, marks a pivotal step toward modernizing Kenya’s aviation legislation. Spearheaded by the KCAA, the Bill consolidates the Civil Aviation Act 2013 and Civil Aviation (Amendment) Act 2016; addresses gaps in the current legal framework; and incorporates emerging issues such as drone regulation, environmental concerns and safety standards. The Bill also addresses all the gaps identified during the ICAO (International Civil Aviation Organization) Universal Safety Audit Program – Continuous Monitoring Approach (USOAP-CMA) that Kenya underwent in 2018. The Bill’s stakeholder consultations, which concluded in late 2024, reflect Kenya’s focus on international best practices to boost sectoral competitiveness and attract foreign investments.
Expansion of air service licenses
In 2024, KCAA approved air service licenses for more than 10 new air operators, further diversifying Kenya’s aviation landscape. The expansion includes domestic and international operators, aiming to improve connectivity, foster international trade and competitive pricing, and stimulate tourism. This development underscores Kenya’s aspirations to position itself as a leading aviation hub in Africa, facilitating the free flow of passengers and cargo.
Infrastructure overhaul at Kenya’s largest airport
In the 2023/2024 fiscal year, the KAA unveiled an ambitious project to upgrade Jomo Kenyatta International Airport (JKIA), which will improve its ability to serve as a point of connection to the global supply chain and ease the movement of people and products. Key upgrades include expanding passenger terminals, adding aircraft parking bays and increasing runway capacity. These enhancements address current operational limitations and aim to elevate JKIA’s status as a regional gateway, meeting the demands of local and international airlines.
Trends in aircraft financing
As Kenya’s aviation sector grows, aircraft financing remains a complex area, influenced by economic volatility, regulatory concerns and the financial stability of local airlines. The global hesitation toward financing African airlines persists due to perceived higher risks, and Kenya is no exception. However, emerging trends offer the following solutions.
Shift toward local financing initiatives
To address financing gaps, there is an increasing focus on developing local leasing and financing platforms that cater specifically to the African market. Such initiatives are designed to be more flexible, accommodating the unique operational needs of regional airlines and aligning with domestic financial frameworks.
Government intervention
The Kenyan government’s consistent support of Kenya Airways is an example of the public sector’s critical role in stabilizing the national aviation industry. While Kenya Airways has faced financial difficulties, government interventions – ranging from bailouts to proposed restructuring – aim to strengthen the airline’s position, indirectly providing stability to the overall aviation sector.
Focus on sustainability and green aviation
Aligning with global trends, Kenya has embraced sustainability initiatives within its aviation sector. KCAA collaborates with stakeholders to reduce carbon emissions, with measures that include exploring green technologies and participating in ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). These efforts underscore Kenya’s commitment to sustainable development in aviation, which is increasingly relevant for international investors prioritizing environmental considerations. Airlines such as Kenya Airways are also investing in sustainable aviation fuel production.
Risk mitigation strategies for lessors and financiers
International lessors and financiers are cautious about entering the Kenyan market due to certain risks, including regulatory uncertainty, currency volatility and the financial health of local carriers. Some of the primary approaches to risk mitigation include:
Comprehensive due diligence. Conducting extensive background checks on potential lessees is essential to assess financial stability and operational integrity. This due diligence includes reviewing lessees’ historical performance, regulatory compliance and existing debt obligations.
Maintenance reserves and security deposits. Requiring lessees to maintain reserves for future maintenance and deposit security ensures the aircraft remains in optimal condition throughout the lease. This financial provision protects lessors against unforeseen repair costs and mitigates the risks of default.
Insurance requirements and letters of credit. Lessors often mandate comprehensive insurance policies, covering hull and liability, to safeguard their assets. Additionally, irrevocable letters of credit offer an extra layer of security, enabling lessors to recover dues if the lessee defaults.
IDERA and Cape Town Convention provisions. To simplify enforcement actions, such as repossession, lessors may request that an Irrevocable Deregistration and Export Request Authorisation (IDERA) be signed by the lessee and endorsed by the director general of the KCAA. Kenya’s adherence to the Cape Town Convention further strengthens legal protections, facilitating smoother asset recovery in the case of default. Kenya is a signatory to the Cape Town Convention, which grants lessors a robust self-help remedy through the use of an IDERA. However, there have been isolated instances where Kenya's judiciary has undermined the strength of an IDERA by intervening in ways that limit its enforceability. This judicial interference challenges the full realization of the rights intended by the Cape Town Convention for lessors operating within Kenya.
Reed Smith’s Aviation Working Group is collaborating with Spencer West to host an international moot court in 2025, inviting the Kenya Judiciary to participate. This event will aim to underscore the significance of the Cape Town Convention and the International Interests in Aircraft Equipment Act, ratified by Kenya, in protecting lessors’ rights. By engaging the judiciary directly, we seek to emphasize the impact of these international treaties and ensure their purpose and the importance of upholding IDERA provisions are fully appreciated in Kenya’s legal landscape.
Periodic monitoring and audits. Regular monitoring, including on-site inspections, allows lessors to ensure that aircraft meet maintenance and safety standards, reducing risks associated with regulatory compliance lapses.
Customized lease agreements. Developing agreements with specific clauses that address jurisdictional risks is essential when operating in Kenya. It is important to customize leases to address local legal frameworks, providing greater contractual flexibility and protection.
Conclusion
Kenya’s aviation industry is one of the primary connections between the domestic and global supply chains and is on a trajectory of growth and transformation, marked by significant regulatory developments, infrastructural upgrades, and an emphasis on sustainability. While challenges persist, particularly in aircraft financing, strategic measures by international lessors and financiers – backed by experienced legal advisors – offer pathways to capitalize on the opportunities in Kenya’s evolving aviation landscape.
