Wheels up: The aviation industry has seen vigorous growth in recent years

The rise of the aviation sector in the Gulf over the past decade is the result of rapidly changing economic and demographic conditions around the world, which have spurred governments throughout the region to direct considerable investment towards improving air transport infrastructure and expanding national carrier. Abu Dhabi is at the forefront of these developments. In the decade since the national carrier, Etihad Airways, was established in 2003, it has become one of the world’s fastest-growing airline, and one of the largest in the Middle East. While the carrier’s rapid expansion can be chalked up primarily to economic growth in the region, it has also undoubtedly been supported by the development of the Abu Dhabi International Airport (AUH) as a major hub linking traditional markets in the West with new markets in the wider Middle East, Asia and, to a lesser extent, Africa.

Despite the expansion of the sector in recent years, Abu Dhabi’s aviation industry faces a number of potential challenges. The market forces that have led to the rise of the emirate as an air transport hub have also contributed to the establishment of major aviation centres and carriers in several Gulf cities, most notably Dubai, which is home to Emirates, and Doha, which has invested heavily in the state-owned Qatar Airways. While the high rate of growth in the region thus far has sustained the rapid expansion of three major airlines, competition could potentially become an issue in the future, particularly on key east-west long-haul routes, which are a central focus for all three airlines. Despite this and other issues, most local players are looking forward to continued expansion for the foreseeable future.

A Regional Hub

 AUH is owned and operated by Abu Dhabi Airports (ADAC), a government-owned firm with a mandate to manage the development of the emirate’s aviation infrastructure. The firm oversees five airports, namely AUH, Al Ain International Airport, Delma Island Airport, Sir Bani Yas Island Airport and Al Bateen Executive Airport. Additionally, ADAC operates two remote check-in facilities, one in the centre of Abu Dhabi City and another at the Abu Dhabi National Exhibition Centre. In 2013 16.5m passengers travelled through Abu Dhabi’s airports, up from 14.7m in 2012, according to data from Statistics Centre – Abu Dhabi (SCAD). The majority of these passengers – around 99% in 2012 – arrive, depart or transit at AUH, which is one of the busiest airports in the Gulf.

AUH is located around 50 km east of the capital on a 60-sq-km plot of land. The first airport at this location was built in 1982, after the emirate’s previous primary international airport – since converted into Al Bateen Executive Airport – was deemed to be too small. AUH was initially designed with a capacity of 5m passengers. However, as a result of passenger traffic ramping up since the early 2000s, ADAC has had to expand the airport considerably. In 2005 some 5.5m passengers passed through the facility, according to SCAD, and by 2010 this figure had doubled to 11m, and it has continued growing since. In 2013, a total of 16.5m passengers passed through AUH, up 12.4% from the same period the previous year.

Growing Demand 

To handle rapidly rising passenger traffic at AUH, ADAC has expanded the airport a number of times since the early 2000s. In 2005 a second terminal was completed, bringing total passenger handling capacity to 7m. With the completion of Terminal 3 in 2009, this figure jumped to 12m. The 2005 and 2009 expansion projects were technically stopgap measures, meant to cater to passenger growth prior to the opening of AUH’s new terminal, the 700, 000-sq-metre, Dh10.8bn ($2.9bn) Midfield Terminal Building (MTB), which has been under construction since 2012 and will be able to handle 30m passengers annually when it opens in July 2017. According to ADAC, the new terminal should be able to handle projected growth in passenger traffic at the airport for some time. A total of 21.5m passengers are expected to pass through AUH in 2017, well within the capacity of the new terminal. Still, the firm is already looking into potentially expanding the MTB to handle 40m-50m passengers in the future, if necessary. Additionally, ADAC is establishing a free zone at AUH and at other airports in Abu Dhabi under the name Abu Dhabi Airport Business City, with the goal of attracting aviation, aerospace and logistics companies to set up shop in Abu Dhabi. In conjunction with the government-owned Mubadala Development Company, ADAC recently established the Nibras Al Ain Aerospace Park (Nibras), a 25-sq-km industrial zone that aims to attract aviation and aerospace companies to the city of Al Ain (see Security, Aerospace & Defence chapter).

Flag Carrier

 The rapid expansion in passenger traffic at ADAC’s airports is closely related to the significant growth of Etihad Airways. In 2013 it carried about 12m passengers in total, up 12.1% on 10.7m passengers in 2012. In addition to regularly buying new aircraft and adding new destinations, Etihad Airways has expanded by buying minority equity stakes in a number of foreign airlines. As of mid-2013 the carrier owned minority stakes in airberlin (29%), Air Seychelles (40%), Ireland’s Aer Lingus (3%) and Virgin Australia (20%). The airline will also acquire 49% of Air Serbia from January 2014, and has announced its plan to acquire 33% of the Swiss regional carrier Darwin Airline. In an additional deal, concluded on November 20, 2013, Etihad acquired 24% of India’s Jet Airways.

In terms of enhancing the company’s passenger and trans-shipment position, James Hogan, CEO and president of Etihad Airways, told OBG that the focus was to continue establishing the emirate’s credentials as a “critical global hub”. “Two main drivers are behind this in Abu Dhabi,” Hogan said. “First, Etihad Airways’ unique partnership strategy means our industry-leading organic growth has been boosted by codesharing and by strategic partnerships, creating a combined network of almost 400 destinations. This means we now have the largest network of any Middle Eastern carrier. Second, as part of its long-term economic development strategy, Abu Dhabi is investing in its infrastructure, with construction well underway for the MTB, a development that will take AUH to the next level of capacity and competitiveness.”

 Private Aviation

 Al Bateen Executive Airport, which serves privately owned and charter aircraft, has grown steadily in recent years. ADAC reported an increase in visiting aircraft of 18% at the airport over the course of 2013 as compared to 2012. Al Bateen is particularly busy during major local events, such as the Formula 1 Abu Dhabi Grand Prix, the International Defence Exhibition and Conference, and the World Energy Summit.

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The Report: Abu Dhabi 2014

Transport chapter from The Report: Abu Dhabi 2014

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