Dubai-UAE looks to cement its super-hub status with $32b investment.

September, 11th 2014

Desert destination Al Maktoum International airport stands alone in the desert, on the fringes of Dubai.

Closer to the border with neighbouring Abu Dhabi than Dubai’s bustling city centre, the airport only hosts cargo carriers and a handful of passenger airlines, and is a remote destination for most of the city state’s residents. Indeed, the ride through multiple roundabouts from the airport’s entrance to the modest passenger terminal at the heart of this 56 square kilometre facility feels like a journey in itself.

Yet Dubai’s constant evolution looks set for a new phase as it embarks on a $32 billion investment plan to ramp up the airport’s capacity from handling 5 million passengers a year to at least 120 million by 2022 — and possibly as many as 200 million by 2050.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum Vice-President and Prime Minister of the UAE and Ruler of Dubai is betting that the rapid growth of the city state’s Emirates Airline, combined with the failure of some western countries to expand airport capacity, will route millions more global travellers via this massive desert complex.

 

It is a big gamble, but one that has paid off so far for Dubai. Dubai International airport, currently the city state’s main hub, as recently as 2003 handled just 18 million passengers — a fraction of those passing through London, Paris, Amsterdam or Frankfurt.

But by next year Dubai International airport could knock London Heathrow off its perch as the world’s busiest airport by number of international passengers — with more than 70 million expected to move through its marbled halls, 60 per cent of whom will be en route to somewhere else.

“If you look at the position of Dubai, it could not be better placed in the economic order of the 21st century,” says John Strickland, director of JLS Consulting. With two-thirds of the world’s people living within eight hours of Dubai, the city state is well positioned to respond to growing demand for international travel with a newer, bigger airport.

Significant advantage

Dubai’s emergence as an aviation mega-hub is being powered by Emirates and Flydubai, an airline focused on short-haul flying.

State-controlled Emirates, the world’s largest operator of the Airbus A380 superjumbo and Boeing 777 long-range jet, is expected to switch its operations to the expanded Al Maktoum International airport in the mid-2020s.

Emirates’ move should give it a significant advantage over US and European rivals in the global race for long haul business and leisure travellers. While some western airlines are struggling to add new routes due to airport constraints and ageing infrastructure, Emirates should have no such challenges.

The news has been greeted with particular bitterness in the UK, where the decades-long debate over where to build new runways shows no sign of being resolved quickly.

“It is a big threat to our competitiveness,” says Nathan Fletcher, a spokesman for Heathrow Airport Holdings, which is campaigning for a third runway to increase its annual capacity from about 80 million passengers to 130 million. “We are at 99 per cent capacity.”

Willie Walsh, chief executive of International Airlines Group, which owns British Airways and Iberia, is equally critical of the UK government’s failure to face down public controversy over airport expansion.

“We have squandered our number one world ranking through a total lack of political vision for Britain,” he said recently in a newspaper interview. “This country has no aviation policy. Just look at what Dubai has achieved — they have real ambition. This isn’t just about aviation, this is about connecting the UK to the world. It will cost British jobs, growth and reputation.”

Shabby airports

Many US carriers, operating from congested and sometimes shabby airports, say they would like the US government to behave more like those of the Gulf states.

Airlines 4 America, the industry lobby group, says that countries in the Middle East, recognise their airlines are “strategic assets”.

“We continue to advocate for the US to treat its airlines similarly, which would help level the playing field and enable us to compete globally,” says Jean Medina, a spokeswoman for the organisation.

Yet there are those who believe that Dubai’s ambitions could be overstretched. “All industrial systems reach their limits one day,” says one big European carrier, which declines to be identified. Too much scale may well result in “negative efficiencies”, it adds.

David Bentley, analyst at the Centre for Aviation, warns that Dubai’s bet on Emirates, with its large fleet of A380 and 777 aircraft, depends on passengers being content with travel that involves passing through a hub airport.

The development of a new generation of aircraft capable of flying long distances from one destination directly to another could potentially undermine the hub business model that Emirates and Dubai’s airports are based on, he says. “If that jumbo model breaks down, they could be in serious trouble,” he adds.

Paul Griffiths, chief executive of Dubai Airports, recognises there is scepticism about whether Dubai will realise its ambitious aviation goals.

Growing consistently

In particular, he acknowledges that Dubai’s two airports are not likely to operate at full capacity simultaneously.

Dubai International airport is being expanded to handle up to 100 million passengers, while Al Maktoum International airport could deal with 120 million in the early 2020s, but Griffiths says: “We are not yet certain that we could operate at 220 million [passengers].”

Nevertheless, he dismisses critics who suggest that Dubai’s plans are not credible. “Air travel remains an aspirational commodity,” says Griffiths. “It is growing consistently. If there are places in the world where supply cannot keep up with demand, demand will go where there is supply. So long as other countries remain ambivalent [about capacity] the more the UAE is hell-bent on providing it.”

Neighbourly competition: Qatar and Abu Dhabi think big

Dubai is not the only commercial centre in the Gulf with plans for a large airport: Abu Dhabi and Qatar also have big ambitions in aviation, writes Simeon Kerr.

A gigantic teddy bear dominates the terminal at Qatar’s new $15.5 billion Hamad International airport in Doha, which opened in May.

The 23-foot tall Urs Fischer sculpture may divide opinion, but fast-growing Qatar Airways, the airport’s main carrier, was pleased that the facility finally opened after long delays.

The airline could not take delivery of its A380 superjumbos at the old city-centre airport, where 21 million passengers arrived last year, because it did not have the right equipment to handle these large passenger jets.

State-controlled Qatar Airways is seeking to fill its aircraft with passengers partly by joining the oneworld airline alliance, which is led by British Airways and American Airlines.

The new Doha airport started operations with capacity to handle up to 30 million passengers each year, but the number is expected to grow to more than 50 million ahead of the country’s planned hosting of the Fifa World Cup in 2020.

Abu Dhabi International airport, just 50 kilometres away from Dubai’s Al Maktoum International airport, dealt with 16.7 million passengers last year, but it is being expanded to handle more than 40 million from 2017.

State-controlled Etihad Airways, the airport’s main carrier, is planning to fill its aircraft partly by developing its own airline alliance. It has bought stakes in six carriers, and is planning to become the largest shareholder in Alitalia, the loss-making Italian flag carrier.

Source: Gulfnews.com