GCC airports are expanding to accommodate over 450 million passengers by 2020 thanks to ever-growing passenger and cargo traffic, boosted by strong tourism growth. Every major airport in the GCC region had record-breaking passenger traffic last year.

At the forefront is Dubai International Airport which has officially become the world’s busiest airport in terms of international travel, surpassing longtime leader London’s Heathrow. Last year, Dubai handled more than 70 million, while Heathrow reported around 68.1 million international passengers.

At Doha’s Hamad International Airport (HIA), which sees some 85,000 passengers daily, traffic reached 26.3 million passengers or a 13 percent growth in 2014, compared to the 23.2 million recorded the previous year. HIA saw a total of 26,356,392 travellers through its passenger terminal complex last year. Of these, 10.6 million passengers travelled through Doha International Airport, Doha’s former commercial airport, while 15.7 million passengers used HIA, the official report stated.

Abu Dhabi Airport reported that during 2014, they welcomed around 20 mn passengers, representing an annual growth of 20 percent, which is the highest ever growth in the airport’s history. According to the report, the gateway handled 154,821 traffic movements, up 14.5 percent compared to the previous year, while cargo throughput rose 12.8 percent year-on-year, reaching 797,069 mn tonnes.

Oman airports are also doing well – Salalah airport had 13 percent passenger rise, and Muscat Airport saw an almost five per cent rise, while the total number of passengers using Kuwait International Airport in 2014 was 10.2 mn with a record increase of 9.6 percent, compared to 2013 and previous years.

Point-to-point traffic

According to Airports Council International (ACI), Middle East airports continued with strong passenger growth at 9.4 percent in 2014, and industry predictions say the aviation market in the region is expected to grow at a CAGR of 5.12 percent over the period 2014-2019.

Airbus predicts at a 7.1 percent annual average growth rate, the Middle East, which attracts around 52 million tourists a year, is going to be the fastest-growing air transport region, while the Arab Air Carriers Organization (AACO) forecasts the number of passengers flying through Arab airports will grow to 571 million by 2026.

Abu Dhabi International Airport under construction
Construction site of the new International Airport in Abu Dhabi.

“The main drivers for GCC airport growth are the simplicity passengers have for one-stop connections between virtually any two city pairs in the world. Emirates, Etihad and Qatar Airways all use the most modern, fuel efficient jets like the 777 and 787, as well as high capacity A380s between congested and busy routes to move people faster and in larger numbers than any of their international rivals can do.

This is why the investment and growth of infrastructure at Dubai International Airport, Al Maktoum International Airport and Dubai World Central, Hamad International Airport and Abu Dhabi International Airport has been increasing continuously to meet the ever-rising passenger numbers that travel to and through these hubs. Emirates, Etihad and Qatar Airways are three of the world’s fastest growing airlines and so it’s only natural the GCC airports they operate out of will also grow in tandem,” explains Saj Ahmad, chief analyst at StrategicAero Research.

Alexander Manakos, partner and head of market Middle East, Lufthansa Consulting.
Alexander Manakos, partner and head of market Middle East, Lufthansa Consulting.

Alexander Manakos, partner and head of market Middle East, Lufthansa Consulting has a similar opinion: “Air traffic growth in the GCC region comes down to several key factors. Probably the most important is the geographic location, taking into account that about two-thirds of the world’s population live within about eight hours flight time to the major hubs in the GCC.

However geographic location can only create a strong impact on air traffic growth due to the dynamics of the home carriers that generate around 75 percent of the traffic at their respective major hubs. The impact resulting from these factors becomes even more obvious if we consider that about half the passengers of the home carriers are transit passengers – in particular if we look at the most prominent hubs in the GCC: Doha, Abu Dhabi, and Dubai.

“Growth is further stimulated by the economic growth of the GCC countries, which are diversifying their economies. This leads to increasing demands for point-to-point traffic to the GCC, driven by a growing demand for tourism and VFR (visiting friends and family) which is related to the expatriate labour force in the GCC,” he says while independent air transport consultant and director of London-based JLS Consulting John Strickland, points out that the growing fleets and route networks of the three hub carriers Qatar, Emirates and Etihad are by far the biggest drivers, along with the growth by low cost carriers Air Arabia and  Fly Dubai.

Not just airports

Doha, Dubai and Abu Dhabi’s airports are for sure state-of- the-art establishments and they can accommodate immense numbers of passengers, but to cater to the ever-growing passenger and cargo traffic, boosted by strong tourism growth and expansion of airline alliances in the region, all GCC airports are expanding, or planning major expansion. By 2020, when all expansion projects are complete, Saudi Arabia airports are expected to have a combined capacity to handle over 100 million travellers.

TechNavio’s report from last December predicts the GCC airport construction market will grow at a CAGR of 7.86 percent to 2019. Moreover, bigger, more active airports mean increased duty free revenues and landing fees, more jobs and better imports and exports. Dubai International airport is, according to Oxford Economics Report, already directly connecting the Emirate with 149 cities which have populations of more than one million creating potential export markets for over 916 million people, or 13 percent of the world’s population.

A recent CAPA (Centre for Asia Pacific Aviation) study indicates nearly USD 60 billion was being spent on airport developments in the Middle East region. Are the biggest GCC cities becoming aerotropolises, places where major business and urban development are focused around the airports? It may be so, because the fact is GCC airports have evolved to go well beyond their traditional role and they are developing their own world which is stretching into the core of a traditional city concept.

Numbers are supporting the need for airport expansion in the GCC: it is expected that airports in the Gulf area will welcome more than 450 million passengers by 2020, which will significantly increase their contribution to their countries’ GDP.

In Dubai, the aviation industry accounts for 21 percent of the workforce and 28 percent of the city’s GDP.

Government estimation is that it will contribute with USD 53.1 billion or 37.5 percent in 2020, and support over 754,500 Dubai-based jobs.

In Abu Dhabi, present contribution of the aviation sector to GDP is 2.9 per cent (USD 19.45 billion), and in Qatar the industry contributes with 11 percent to the country’s GDP.

There is room for further growth, aviation experts agree. “The growth we have observed over the past decades was outstanding and annual growth rates may not continue to increase on the same scale. From a GCC perspective there is still room for growth, while from the perspective of specific airports, the picture might be different.

As mentioned earlier, traffic growth does not only result from the geographic location and the development of the national economies, but it is substantially impacted by the competitive strength and the resulting growth of the home carries. Having said that, we expect to see airports that will grow much stronger than others as their future development will probably go hand in hand with the future growth of their home carriers, which is not at the same levels in all GCC countries,” says Manakos.

“Consider that Dubai World Central, the biggest airport project in the GCC, will not be complete until around 2030, by then, air traffic in the UAE alone will rise by at least 15 percent per annum, so there will always been a need for further investment and growth. Between Dubai International Airport and Al Maktoum International Airport at Dubai World Central, these two will cater to almost 400 million passengers by 2030.

Investments in both will continue, there is no ‘end date’ for that to stop. Unlike airports which have little or no room to grow, like London Heathrow, GCC airports are learning lessons today that investment in airports is a key macroeconomic driver and such opportunities for growth should not be squandered or strangulated,” underlines Saj Ahmad.

Future challenges

One of the major regional aviation issues is air traffic management – the sky above the Gulf is overcrowded, with predictions that total aircraft movement in the Gulf airspace will hit over 2.3 million by 2020.

An urgent and coordinated solution is required, Strickland points out while Ahmad’s opinion is that the first and easiest solution to greater GCC air traffic efficiencies is to open up wasted military air space to commercial traffic.

“It’s a finite resource that is hideously wasted. Aside from the recent IS-related targeting by UAE, Saudi and other air forces, there has never really been a need for so much air power militarily to monopolize commercial airspace. It’s a waste of perfectly good and unused capacity.

“The other longer term focus should be a GCC-wide policy of opening up traffic space between GCC countries so that flow of traffic can be increased and not strangled. The AACO needs more muscle. Beyond lip service, it has to demonstrate and orchestrate cohesiveness between GCC countries, airlines, airports and systems while maintaining flight safety standards. The GCC is one of the safest regions in the world and it needs to keep it that way. Jeopardizing safety for growth is a non-starter. This is why the AACO has to start showing leadership, which at present, in my eyes, is lacking.”

Beyond the overcrowded sky, airports in the region will have to deal with other challenges such as even better passenger handling, more personally orientated customer experience, and according to Strickland, political unrest across the broader Middle East and complaints from the US and some European airlines alleging unfair competition. Ahmad points out that the biggest challenge in the future comes from the will to invest.

“Without major reforms to some GCC and Arab countries like Saudi Arabia, Egypt, Jordan Kuwait and Bahrain, they will fall behind pace-setters in Qatar and the UAE. These latter two nations have invested hundreds of billions of dollars in maintaining and developing both airports and the incumbent hub airlines that use them. There simply is no place for a huge airport if it won’t be put to full use. That’s why the realization of Al Maktoum International Airport at Dubai World Central is being managed piecemeal so that it grows with passenger numbers. There is no point over-investing and then the asset sits underutilised,” he says.

Ahmad underlines the need to ensure the GCC develops and implements a true pan-Arabian open skies pact so that it allows the free movement of people without restrictive visa entry issues. “This is the single biggest prohibitive element holding back true growth in the GCC because GCC member nations simply cannot work out how to devise, much less implement, an air accord which allows free movement that lifts flight restrictions. Once this cap has been lifted, perhaps then we’ll see the real growth potential that commercial air traffic has to offer in the GCC.”

Manakos expects continuous pressure on infrastructure to accommodate traffic growth, based on the level of fleet growth of the major carriers in the GCC. “However, a certain competition between airports is to be expected, at least amongst those serving the same local catchments area. Low-cost carriers may also put a certain pressure on airport fees. The challenge for smaller airports in the region will probably be to attract enough traffic, taking into account the competitive disadvantages of their home carriers and their limited importance for transit traffic.

“Significant amounts of traffic will be absorbed by the home airports of the mega hub carriers in the GCC. For the large airports, we see a growing challenge to offer the most attractive customer experience for passengers. Passengers will take their transit airport into account when making their buying decisions.  It is obvious that GCC airports and their level of customer centricity will also be an influencing factor for the attractiveness of their home carriers when a passenger decides to fly from A to B via a transit point in the GCC,” he concludes.