Airport projects and airline purchases worth over US$445 billion are on the anvil across the Middle-East, says a new report on the airline industry in the region.
The ‘Aviation and Airports 2016’ report prepared by MEED, a leading business intelligence provider in the region, show close to 1,300 aircrafts valued at an estimated $345 billion are on order or pending delivery in the region. In addition, airport projects worth more than $100 billion are also underway or are being planned across the Middle-East.
While the airline purchases are meant to replace aging aircraft fleet or meet increasing passenger volumes, the airport projects are mainly intended to address a capacity gap. Last year, across the Middle-East, air-passenger volumes outstripped the capacity of airports by 11 percent. This mismatch between passenger volumes and handling abilities of airports is likely to increase and result in a throttling of air services in the near-term.
Airport projects underway are expected to accommodate a capacity of 400 million passengers annually over the next 10 to 20 years. New and expanded airports, expected to be completed between end of 2016 and 2020, include the Muscat International in Oman, Midfield Terminal Complex in Abu Dhabi, King Abdulaziz International in Jeddah and the new passenger terminal at Bahrain International.
In the near-term, the largest potential opportunities for contracting and sub-contracting companies are expected to come from the construction of the next phase of Al-Maktoum International in Dubai, the further expansion of Jeddah airport, Hamad International airport expansion, and the upgrade of airports in Iran.
Travel demand, as reflected by double-digit average annual growths in most airports’ passenger volumes since 2010, and the overall economic expansion programs prior to the oil price decline have fuelled the rapid expansion in aircraft fleet and airport capacity. Going forward, the staging of global events such as the Dubai Expo 2020 and 2022 Fifa World Cup in Qatar are also expected to boost the region’s profile as a travel and tourism destination.
The projected increase in passenger traffic would also necessitate new airplanes. According to the Middle East Aviation & Airports 2016 report, the nearly 1,300 aircraft that are on order or pending delivery to Middle Eastern airlines, include aircrafts for the three major players in the region, Dubai’s Emirates Airline, Abu Dhabi’s Etihad Airways and Qatar Airways. Most of the smaller airlines have put in place restructuring programs to enable them to contribute to the expansion of each state’s economy in view of lower oil income and increased urgency to diversify their economies away from oil.
The aircrafts on order or pending delivery to regional airlines in descending order include:552 to the UAE, 369 to Qatar, 218 to Iran, 50 to Saudi Arabia, 45 to Jordan, 20 to Oman, 16 to Bahrain and 10 to Kuwait.
However, despite sterling growth in recent years, there are early signs that the growth in the region’s aviation sector could potentially slow down as the global economy slows and drags travel demand along with it. Other threats include the political instability in many parts of the Middle East region, lack of state funding for future projects, as well as limited airspace allocation.
The report warns that these threats would require timely adjustment in policies as well as an efficient and concerted effort between government and private stakeholders across the region.