As it continues to develop and diversify its economy, transport is playing a central role in the long-term development of Abu Dhabi. Not only does the growing population mean investment is required to keep Abu Dhabi City moving, but transport in the broader sense occupies a significant position in both the emirate’s economic diversification strategy, known as Abu Dhabi Economic Vision 2030, as well as in Plan Abu Dhabi 2030: Urban Structure Framework Plan, the comprehensive roadmap for the city’s development over the coming two decades.
SECTOR IN NUMBERS: In mid-2011, the population of Abu Dhabi was 2.12m, as per figures from Statistics Centre – Abu Dhabi (SCAD), compared to 1.4m in 2005. According to projections in Capital Plan 2030, the plan drawn up by the Urban Planning Council (UPC), the population of the Abu Dhabi metropolitan area stood at 930,000 in 2007 and was set to reach 2m by 2020 and 2.6m by 2030.
Abu Dhabi City is situated on the island of the same name and was largely built during the first oil boom of the 1970s with a maximum population of 600,000 in mind. It is therefore acknowledged that the capital requires extensive remodelling to enable it to cope with the projected rise in inhabitants. The populations of other regions within the emirate are also growing rapidly; figures from the UPC show the population of the Al Ain region projected to go from 568,000 people in 2012 to 1m inhabitants by 2030 and the population of Al Gharbia region to rise fourfold, from 107,000 in 2005 to 450,000 in 2030.
On the federal level, the UAE’s connectivity is already a key selling point for attracting businesses and investors, while the investments Abu Dhabi has made under the Economic Vision 2030 strategy in a range of sectors running from manufacturing, tourism and real estate to media and the creative industries have already increased the demand for transport and heightened the need to enhance the emirate’s connectivity. To this end, significant investment is taking place across the full range of transport modes to turn the sector from a subsidiary supporter to a major driver of the economy in its own right. In 2011, according to SCAD, transport and storage contributed some Dh20.62bn ($5.6bn) to the emirate's economy at current prices, equal to 2.6% of GDP.
REGULATION: Although certain regulatory mandates such as civil aviation fall to federal organisations like the General Civil Aviation Authority, transport is primarily the responsibility of each individual emirate, and in Abu Dhabi the Department of Transport (DoT) is in charge of the overall transport system. The DoT primarily functions as a regulator, although it does run certain services, such as the public transport network – including buses and taxis – directly.
In other fields, day-to-day operations are left to a number of state-owned companies which are generally run on a commercial basis. These include Abu Dhabi Ports Company (ADPC), Abu Dhabi Airports Company (ADAC) and the UAE’s national carrier, Etihad Airways. The UPC oversees the planning function in the emirate, and as such is responsible for drawing up the urban structure plans according to which Abu Dhabi City and the rest of the emirate’s cities and towns are to grow and be remodelled.
In addition, the DoT unveiled its own roadmap, the Strategic Transport Master Plan, in 2009 to provide a framework for the development of transport infrastructure. It incorporates local development schemes and focuses on developing a multi-modal public transport system, with investment in metro, light rail and water taxis; expansion of bus networks; and spending aimed at improving road, sea and air links.
AVIATION: One of the most important transport segments in the UAE is aviation. Although official figures for its contribution to the economy were not available at the time of writing, Sultan bin Saeed Al Mansouri, the federal minister of economy, told the Abu Dhabi Global Aerospace Summit in April 2012 that aviation had directly contributed Dh61.3bn ($16.7bn) – 6.3% of national GDP – a figure that rose to around Dh150bn ($40.8bn), or roughly 15% of GDP, when taking into account indirect effects such as tourism. The UAE is about a four-hour flight from both affluent European markets and the rapidly growing economies of the Indian subcontinent, which has helped it to establish itself as a regional business centre.
LOCAL CARRIERS: The UAE is home to two major airlines: Emirates, based in Dubai, and Etihad Airways in Abu Dhabi. According to figures from Etihad, which was founded in 2003, it carried 8.3m passengers in 2011, up 17% on 2010. During the January-August 2012 period, passenger numbers were up 28% yearon-year (y-o-y), from 5.28m to 6.76m, while cargo was up 20% y-o-y, from 198,246 tonnes in January-August 2011 to 236,918 tonnes during the same period in 2012. Seat factor increased from 75.1% to 78.3% over the same period. Total revenue in 2011 jumped 36% to $4.1bn, up from $2.98bn in 2010. Earnings before interest, tax, depreciation, amortisation and rentals stood at $648m in 2011, and the company booked a profit for the first time, of some $14m. The success has carried over into 2012 with encouraging first-half revenues of $1.72bn, up 28% y-o-y.
As of August 2012, the carrier served just under 90 destinations and has plans to commence new routes to Washington in January 2013 and to São Paolo in Brazil in June 2013. Further, Etihad has taken stakes in several other carriers. To date, these include a 29% stake in German airline Air Berlin in December 2011, a 40% stake in Air Seychelles (the islands’ national carrier) in January 2012, 3% in Ireland’s national airline Aer Lingus and 4.99% in Virgin Australia Etihad acquired in May and June 2012, respectively.
Such deals have served to increase Etihad’s catchment area and attractiveness to customers, and along with Abu Dhabi’s convenient location have played a part in helping the airline capture a large slice of the transit business between Europe/North America and South-east Asia. Currently, around half of Etihad’s passengers transit through Abu Dhabi en route to other destinations, while the remainder are visiting the emirate as their main destination. Cargo accounts for an important share of its business as well – about 25%, according to the company.
In addition to Etihad, there are a number of private aviation firms active in the emirate. These include Abu Dhabi Aviation (ADA), founded in 1976, originally to provide services to the offshore oil industry. The group, in which the Abu Dhabi government retains a 30% stake, has since diversified into providing helicopter services across the world. It has operations across five continents, in countries from Yemen to Spain to Papua New Guinea, and offers services such as offshore operations support, crop spraying and fire fighting. ADA owns 95% of Maximus Air, a cargo group, and 50% of Royal Jet, a VIP aviation service. Other local private aviation companies to mention include Falcon Aviation Services and Al Jaber.
POLICY: In general, the UAE’s aviation policy is to seek open-skies agreements with all other players. To date, Etihad has been able to secure enough landing rights to ensure organic growth, while the UAE’s aviation regime is considered fair, offering landing slots on a commercial basis. Abu Dhabi’s proximity to Asia, which looks set to be the driver of aviation growth over the coming decade, means Etihad seems well situated to benefit if it plays its cards right. While competition within the industry generally, and for the transit passenger business in particular, is intense, the current rate of expansion is such that for now there remains plenty of room for all players.
ABU DHABI INTERNATIONAL: Etihad’s growth has in turn led to a rise in passenger growth at Abu Dhabi International Airport (ADIA), part of the ADAC stable and Etihad’s home airport. In 2011, it saw 12.4m passengers, compared to 10.8m in 2010, an increase of 12%. As of May 2012, the airport served over 50 airlines in addition to Etihad and over 90 destinations in about 50 countries. To cope with the continuous increase in passenger numbers, ADAC has commissioned a new terminal complex. Total investment in the project is estimated at approximately $6.8bn, although this figure does include some work that has already been carried out. In June 2012, ADAC awarded the Dh10.8bn ($2.9bn) contract for the construction of the 700,000-sq-metre Midfield Terminal Building (MTB) to a consortium of Consolidated Contractors Company, TAV and Arabtec.
Upon completion in 2017, the MTB will add capacity for 30m passengers a year, bringing total capacity at the airport to 47m passengers a year and cementing its status as a global transit hub (see analysis). Until the MTB is completed, ADAC has undertaken a number of remedial measures to ensure the airport copes successfully with the growth in passenger numbers. These include opening Terminal 3, a dedicated facility for Etihad in 2009; refurbishing Terminal 1, which was completed in 2011; and adding new parking capacity. ADAC plans to set up a free zone at ADIA, as well as at the airports in Al Ain and Al Bateen. These zones will mostly be geared to logistics groups, but ADAC is still finalising the precise terms and incentives. The idea is to offer a one-stop shop, which will help keep the number of procedures to a minimum, and provide facilities under one roof.
AL AIN: Al Ain International Airport, based in the eastern oasis city of the same name, is primarily a regional airport, although it does have some international connections to enable labourers to travel in and out of the UAE. It has the capacity to handle 1000 passengers an hour at peak times, and is currently served by seven airlines. However, the airport is set for massive expansion as Al Ain has been designated as the site for the development of an aviation and aerospace cluster, which has been branded as Nibras, as part of Economic Vision 2030.
Mubadala Aerospace, a division of the government-owned investment company, is currently developing the cluster in collaboration with several different international partners, such as Boeing, Airbus and Lockheed Martin. The aerospace park will house equipment for aircraft assembly and manufacture, maintenance, repair and overhaul facilities, and flight schools. Already, Al Ain is home to two flight schools, Horizon Flight Academy, which trains aircraft pilots, and Al Ain International Aviation Academy, which trains engineers in aircraft maintenance, as well as Strata, a Mubadala venture which has been making composite parts for aircraft since 2010 in cooperation with Boeing, Airbus and the Austro-Chinese group, FACC.
OTHER AIRPORTS: Other ADAC facilities include Al Bateen Executive Airport and the Sir Bani Yas and Delma airports. Al Bateen remains the only dedicated business aviation facility in the region.
Once the main airport for Abu Dhabi before Abu Dhabi International Airport opened in 1982, it spent some time as a military airstrip until ADAC took over the site in 2008 and reopened it as a hub for business aviation with $54m of investment. Traffic has continued to grow since; during the first four months of 2012, traffic was up 26% y-o-y, registering a total of 3391 aircraft movements over the period, according to a statement from the airport. Sir Bani Yas is a nature reserve to which tourist flights are available, while the Abu Dhabi government operates link flights to the 5000 residents of Delma Island, just off the mainland.
MARITIME: Growth is also behind the expansion of the ports network. While ADPC owns all the ports in the emirate, operations are managed by Abu Dhabi Terminals (ADT), also a quasi-state-owned firm. Currently, the main port in Abu Dhabi is Mina Zayed, on the main island of Abu Dhabi City.
The port’s position, increasingly hemmed in as it now is by the rapidly growing urban area, has meant there is limited room for expansion, and the port has become a significant contributor to worsening traffic congestion in the city. Moreover, the development of several large manufacturing industries in the emirate has resulted in the demand for facilities geared towards exports, while Mina Zayed is almost completely an import-oriented terminal. According to Tony Douglas, the CEO of ADPC, “The success of the emirate’s diversification policy, ongoing investments in the oil and gas sector, and development of export-oriented industries have all contributed to increased port activity.”
The solution is a new port, known as Khalifa Port (KP), at Taweelah, north-east of Abu Dhabi City off the main Abu Dhabi-Dubai motorway (see analysis). KP is being developed in tandem with a dedicated industrial zone, Kizad, creating an integrated port and industrial complex which enjoys free-zone status.
KP became operational in September 2012, with an initial capacity of 2.5m twenty-foot equivalent units (TEUs), but the ability to scale that up to 5m TEUs within a lead time of one year. Initial general cargo capacity is 15m tonnes a year. The container section at KP will be the first automated terminal in the Middle East, allowing for greater efficiency and transparency, and will be operated by ADT, while the port will also feature bulk and liquid terminals, as well as wharves dedicated to particular industries located in Kizad.
While Mina Zayed is a feeder port and currently only capable of handling vessels up to Panamax size (80,000 tonnes), KP will be able to house the biggest vessels currently afloat, with a dredge of 16 metres. Over the longer term, it has the potential capacity to become a mainline port, as opposed to a feeder facility, attracting much larger vessels and reducing lead times and freight costs – measures that will ultimately contribute to further cementing the competitive advantage for firms based at Kizad. “The emirate has invested a lot of money into its ports and maritime capacity,” Claus Breitenbauch, the CEO of ESHIPS, an Abu Dhabi-based dry bulk and tanker shipping operator, told OBG. “Both the hard and soft transportation infrastructure is solid and continues to expand,” he added.
In 2011, Mina Zayed handled some 720,000 TEUs, an increase of around 40% y-o-y, and around 5m tonnes of general cargo, up about 15% y-o-y. Once KP is up and running, Mina Zayed’s container business will be transferred to the new port, but the general and bulk terminals are due to remain in operation for some time after the new port opens. The old container terminal is likely to be redeveloped as some sort of tourist facility, although plans had yet to be announced at the time of writing. ADT also operates a port facility at Musaffah, to serve the adjacent industrial area of the same name. There are also a number of other small ports and fishing harbours that are operated by the government on a public service basis.
RAIL PROJECTS: KP is expected to be one of the ports in the UAE to benefit from a rail connection, with the 1200-km Etihad Rail (known until March 2011 as Union Railway) due to link the country together by 2018. Over the longer term this will also join up with rail projects in neighbouring Saudi Arabia and Oman, creating a pan-GCC rail network (see analysis), with the completion date for this wider network set for 2018. Across the GCC states a total of around $100bn of investment in railway projects is currently planned.
In the past, the widespread availability of cheap oil as well as technical difficulties associated with laying tracks in the desert resulted in the expansion of roads across the Gulf at the expense of railways. The fact that the region’s main commodity export, hydrocarbons, is largely transported by pipeline further reduced the appeal of rail. As a result, until the construction of the Dubai metro, the region’s only railway was a line between Dammam and Riyadh.
The equation has changed, however, and a number of factors are now supporting the expansion of rail in the UAE – and indeed the wider region. These include increasing congestion on local roads, growing environmental awareness among the population, a slow but steady shift in the type of commodities exported and practical financial considerations.
Although the road system in the UAE is of high quality, continual population growth has meant that it is under ever increasing pressure. At same time, greater environmental awareness means there is public demand to reduce emissions. Given that a single train can remove up to 300 lorries from the road, and reduce the CO 2 emissions by 70-80%, a shift to rail for bulk freight makes economic and environmental sense. Adding passenger services will also help to improve public transport, which mostly relies on buses at present, reduce traffic on roads and facilitate efforts to knit regional economies closer together.
State-led efforts to industrialise and keep more of the value added from hydrocarbons at home also mean that oil by-products and other bulk goods will account for a growing share of exports, and these are likely to benefit from the reduced cost of moving freight by rail. This is not the only financial incentive to shift to rail, however: sustained high prices for oil in the global market mean it makes more sense to sell crude internationally than consume it at home.
LINKING IT ALL UP: The estimated total investment in the Etihad Rail project is in the region of Dh40bn ($10.9bn), with construction due to begin in early 2012. The first stage will run from near Liwa in the Al Gharbia region to Ruwais, site of a major petrochemicals complex, and from there stretches will be added linking Abu Dhabi to Dubai, then run up the coast to Ras Al Khaimah. A spur will run from Abu Dhabi to Oman from the Al Ain line. Initially, the railway will concentrate on freight traffic, but passenger services between the UAE’s two biggest cities of Abu Dhabi and Dubai and the wider region as well are planned. Alaa Saoudi, country manager for Aramex in Abu Dhabi, told OBG, “The upgraded infrastructure within the emirate, including the new rail network, will play a significant role in reducing road congestion. This will also reinvigorate the transport sector as a whole.”
PUBLIC TRANSPORT: In addition to Etihad Rail, Abu Dhabi plans to develop a comprehensive public transport network as part of Plan Abu Dhabi 2030. In part this is because liveability is one of the hallmarks of the type of city that Abu Dhabi aspires to be, but more importantly, proper public transport also allows cities to become more sustainable in the long run.
Given the projected increase in population, Abu Dhabi has little choice but to develop more buildings, although installing public transport in tandem with this will help to reduce the environmental impact. Since 2008, the DoT has operated a bus network in Abu Dhabi City which is undergoing continuous expansion. The DoT plans to have up to 1300 buses running on 150 local and intercity routes. One feature of the network that stands out is that the DoT plans to install air-conditioning (a must during the Abu Dhabi sum-Air cargo loaded by destination, 2008-11 mer) in all 550 bus shelters. It also operates a bus system in Al Ain. In the longer term, Plan Abu Dhabi 2030 envisages the construction of a metro and tram system in Abu Dhabi alongside the bus network, also supplemented by ferries and water taxis, although at the time of writing no deadline or tenders had been set for these developments.
ON THE ROAD: The pace of economic and population growth in Abu Dhabi means that building new roads is unavoidable if the city is to avoid gridlock. As part of urban development plans, numerous tunnels and bridges are planned to provide more connections between Abu Dhabi Island and the mainland, as well as offshore islands such as Al Maryah and Reem, where new commercial districts are being developed. Several sections of the Dh5bn ($1.4bn) Salam Street tunnel, designed to cut traffic congestion in Abu Dhabi’s central business district, opened in 2011 and others are due to become open soon.
In February 2012, local press reported that the DoT had invited bids for a new Dh2bn ($544.6m) motorway between Abu Dhabi and Dubai, to complement the existing E11 motorway. The E311 will stretch for 62 km, and will improve Kizad’s connectivity as well as that of outer parts of Abu Dhabi and Dubai. Construction is planned to take place through two tenders, one for 34 km and one for 28 km, and is due to be completed by the end of 2014.
OUTLOOK: Abu Dhabi continues to invest heavily in the transport sector, which is set to become a significant growth driver in its own right over the medium to long term, and all modes are seeing improvement. Public transport is due to become increasingly prominent, although the car will undoubtedly remain the primary means of getting around. Aviation is expanding rapidly, and Abu Dhabi may well be able to carve out a role as one of the major east-west transit hubs, while the opening of KP is likely to have a major effect on maritime transport, with the emirate becoming an ever more popular destination to visit in its own right.
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