Transport networks are being expanded across the board

Several major new infrastructure projects are contributing to the rapid development and growth of the transport sector in Abu Dhabi. These include the imminent launch of a national rail network, as well as the construction of a new terminal that will eventually triple the capacity at the emirate’s main airport, primarily to cater to the ambitious expansion programme of the national carrier.

The authorities are also seeking to alter the emirate’s modal transport mix, which is currently heavily reliant on automobiles, by making plans for new urban transport infrastructure, facilitating journeys by foot and bicycle, and redesigning the urban fabric to encourage people to take shorter trips within, rather than between, neighbourhoods.

Economic Contribution

The transport and storage sector contributed some Dh35bn ($9.5bn) to the emirate’s economy in 2013, equivalent to 3.67% of overall GDP and 8.16% of non-oil GDP, according to data from the Statistics Centre - Abu Dhabi (SCAD). The industry is expanding rapidly; sector GDP for the year was up 7.1% on 2012 figures in real terms, and its real compound annual growth rate for the period between 2009 and 2013 stood at over 12%.

Roads

Road transport is currently the only major form of land transport available in Abu Dhabi, and motor vehicles – of which SCAD indicates there were 785,076 in 2012 – dominate passenger transport in the form of private cars and taxis. The emirate boasts a modern, well-developed road system. Main roads in Abu Dhabi City experience periods of localised minor congestion during the rush hour; however, it is currently not a major problem – especially when compared to other cities throughout the world.

“Assuming that traffic continues to grow at approximately the same rate as it has in recent years, we are unlikely to face major congestion problems within Abu Dhabi City over the next five years, particularly in light of major road system improvements and expansions in recent years, such as the construction of the Sheikh Khalifa Highway and the Salam Street Tunnel,” Falah Al Ahbabi, the director general of the Abu Dhabi Urban Planning Council, told OBG. However, it is expected that over the longer term traffic may become more of an issue, especially if measures are not taken to address it (see analysis).

Moreover, the emirate’s road network continues to grow; the combined length of major roads stood at 2522.4 km in 2012, according to SCAD, up from 2368.5 km in 2011. The combined length of minor roads stood at 18,539 km in 2013, compared to 16,825 km the previous year. Major new projects under way include the construction of a 62-km road running parallel to the increasingly busy existing road to Dubai (the E11). In December 2013 Abu Dhabi’s government support services agency, Musanada, signed two contracts worth Dh2.14bn ($583m) for the construction of the project, which is scheduled to take 30 months to complete.

Rail

Rail will soon be coming to Abu Dhabi as well as to the wider UAE, in the form of the Dh40bn ($10.8bn) Etihad Rail project, a 1200-km network in which the government of Abu Dhabi holds a majority ownership stake of 70%, with the remainder held by the UAE federal government. The network will initially offer freight services, but there are plans to launch a high-speed passenger service in the future.

Etihad Rail is being built in three stages. The first of these is 264 km in length and will transport granulated sulphur produced at the sour gas fields of Shah and Habshan, in the interior of the emirate, to the Port of Ruwais for export. Two trains per day will operate on the line, each with a maximum of 110 wagons, carrying a total of up to 22,000 tonnes of the commodity per day. Infrastructure for the line, which was funded by a $1.28bn loan from a consortium of local and foreign banks, has been in place since September 2013; however, as of October 2014 testing of the line was continuing. John Thomas, regulatory affairs advisor at Etihad Rail, told OBG that before the line can enter into operations, sufficient quantities of granulated sulphur are required to fill trains to capacity to allow testing of their systems under operational conditions. Thomas told OBG that the company was aiming to start the first full revenue-generating service by the beginning of 2015.

The 628-km second stage of the project – the longest of the three stages – is due to be completed by 2018 and comprises a line running from the Liwa Junction on the first phase of the network past Abu Dhabi City and on to Khalifa Port and Jebel Ali Port, as well as a branch running off from this line to Al Ain on the border with Oman. Another section will extend stage one from Ruwais to Ghweifat on the border with Saudi Arabia. In September 2014 Etihad Rail announced that funding for stage two from the government was being finalised and that the firm would award contracts soon. “Stage two is more complicated than stage one and the award of tenders has been held up by a few issues; however, these are being resolved and it should take place soon,” Thomas told OBG in the last quarter of 2014.

The final stage of the network is set to consist of a 279-km line extending the second stage into Dubai and on to the Northern Emirates, splitting at Al Dhaid into branches terminating at Fujairah and Ras Al Khaimah, respectively. A date for the launch of stage three has yet to be confirmed. Etihad Rail will also form part of the wider GCC rail network, which is due to enter into operation in 2018.

Mass Transit

Prior to 2008 there was very little in the way of public transport in Abu Dhabi City, leaving the population largely reliant on private vehicles and taxis. However, that year saw the launch of the city’s public bus network and there are now a total of 14 bus lines in operation, in addition to a further five bus lines that serve the Shahama and Bani Yas areas on the outskirts of the city.

The bus system will eventually form just one part of a much larger integrated public transport network; in 2009 the Department of Transport (DoT) published the Surface Transport Master Plan for Abu Dhabi City, calling for the establishment of “an integrated, multi-modal public transport system to provide high-quality alternatives to the car” as part of its vision for the city’s transportation future. The authorities aim to raise the number of public transport passengers to 823,000 a day by 2030.

Central to this vision is the $7.7bn first phase of a metro and light railway network, for which the Abu Dhabi Executive Council approved funding in March 2012, though a construction timetable has not yet been announced. The construction of the metro and the light rail system, along with the expansion of the existing bus network, is a major transport element under the Plan Capital 2030.

While it is largely viewed as an essential development for the city, there is the question of when to implement it. Building a new metro will turn large parts of the city’s business district into a construction site for years, so any plans would require careful planning in order to minimise disruptions.

The project will consist of an 18-km metro line running between Zayed Port (on Abu Dhabi Island) and Zayed Sports City; a 20.4-km light rail line between Al Reem Island and Marina Mall (in the city centre on Abu Dhabi Island), to be known as the Blue Line; and a second 16.2-km light railway line from the Karama area of the city centre to Saadiyat Island, which will be known as the Green Line.

The project also includes plans for a third 13. 4-km circle line along with a bus rapid transit system that has been proposed. In addition, the authorities intend to promote and significantly increase walking and cycling in the emirate (see analysis).

Air Transport

Given rapidly growing air traffic, the emirate’s aviation segment is also set for expansion. “The centre of the world is gravitating towards this region and this is proven by the fact that Dubai has overtaken London’s Heathrow as the busiest airport in the world,” Ali Haydar Ozak, project director of the Abu Dhabi International Airport (AUH) Midfield Terminal Building (MTB) TAV-CCC-Arabtec joint venture, told OBG. “By 2030, the Middle East and Asia are expected to handle 5bn passengers per year, three times more than what it is today.”

To prepare for this growth in passenger figures, many area facilities are being expanded and upgraded. There are five airports operating in Abu Dhabi; of these, by far the biggest is AUH, which is located around 30 km from Abu Dhabi City. It accounts for the vast majority of flights and air passenger movements in and out of the emirate. The other airports are Al Ain International Airport; Al Bateen Executive Airport, a former military facility that since 2008 has catered to private aviation; Delma Island Airport; and Sir Bani Yas Airport. Of these Al Ain is by far the busiest (see Al Ain chapter).

AUH has two runways, the second of which opened in 2008, and three terminals. The third terminal opened in 2009 and is dedicated to the national airline, Etihad Airways. The number of aircraft movements at the airport stood at 135,209 in 2013, up 11.2% over the previous year, according to Abu Dhabi Airports figures, while passenger movements for the year increased by some 12.4% to 16.7m, including 324,107 transit passengers.

Asia was the largest regional market for air passengers, accounting for around 38% of both inbound and outbound passengers, in line with previous years. Traffic at the airport has continued to grow strongly in 2014; passenger numbers for the year were up 20% year-on-year to 20m, while aircraft movements rose 14.4% to 154,821, according to data attributed to Abu Dhabi Airports in local media. “AUH has expanded the number of cities served from 72 in 2004 to 97 in 2014, with its reach now extending to all six continents,” Ali Majed Al Mansoori, chairman of Abu Dhabi Airports, told OBG.

Air Expansion

In order to cater to such rising numbers, a major expansion project is under way at AUH in the form of the construction of another terminal, the MTB. The new facility will have an initial capacity of 30m passengers per year, expandable to 40m, which would triple the airport’s current annual passenger capacity to around 60m in total. The terminal is being built on a 700,000-sq-metre site – making it the largest building in the emirate – and is due to be completed in June 2017.

According to Abu Dhabi Airports, around two-thirds of travellers using the facility will be transfer passengers, while one-third will be leaving from or travelling to the UAE itself. Abu Dhabi Airports has made completing the project on time a clear priority, and in October 2014 the company told OBG that construction work remained on schedule.

In the meantime, pressure on capacity in the airport’s existing terminals is growing. “Infrastructure will be a challenge for us between now and the opening of the MTB given our plans for continued growth,” said Kevin Knight, chief strategy and planning officer at Etihad Airways, which is based out of AUH. Abu Dhabi Airports is putting in place measures to accommodate rising passenger numbers, such as adding a new transfer passenger screening and transfer baggage facility, plans to separate arriving and departing passengers to improve the flow through the airport, 20 new bus gates and 21 new aircraft stands, as well as plans to bring into use additional aircraft stands built for the MTB before the terminal is inaugurated. Etihad Airways is also taking steps of its own to address the issue. “We are looking at how we can structure our schedule to utilise the available capacity as efficiently as possible in addition to expanding infrastructure,” said Knight.

Another issue that will need to be addressed to allow for continued growth at the airport is that of regional air traffic congestion, which is set to worsen as Abu Dhabi, Dubai and Qatar all seek to attract more air traffic and dramatically expand their airport infrastructure. Potential solutions include freeing up space that is currently reserved for regional air forces, which accounts for roughly half of Middle Eastern airspace, and improving coordination between GCC air traffic control authorities or even setting up a unified regional air traffic system.

At present, however, regional governments appear reluctant to pursue either avenue, which suggests that the issue is likely to become a growing challenge in coming years. “It is reasonable to expect that processes, systems and technology will continue to support the way in which airspace management evolves,” Al Mansoori told OBG, “And this will continue at the same pace as the expansion of the regions airlines and airports.”

Air Carriers

The main driver of expansion plans at AUH is the need to accommodate Etihad Airways. The airline is expanding rapidly, with passenger numbers rising 23% year-on-year to almost 11.8m in 2014, and it foresees similar growth levels going forward. Although the airline is comparatively young, having been founded in 2003, it is seeking to rival carriers that have been established for much longer through an ambitious expansion plan. It currently operates 110 aircraft and has more than 200 additional aircraft on order between now and the end of the decade, including Boeing 787s, Boeing 777-Xs, Airbus A350s and Airbus A380s.

In addition to moves to expand its own fleet, Etihad Airways has also been implementing a plan to make strategic investments in other airlines. It holds equity investments in seven airlines across the world and is currently in the process of formalising an equity investment in an eighth airline. “We will continue to grow our own network; however, that has its limits for an airline as young as we are,” said Knight. “To compete on a global stage and match the reach of some of our competitors, we also need to extend our network via partnerships, which we are doing in the form of both code sharing and targeted investments.”

Etihad Airways has acquired stakes in Irish flag carrier Aer Lingus; Germany’s airberlin; Air Serbia; Virgin Australia; Air Seychelles; and India’s Jet Airways, highlighting the airline’s new strategy of expanding internationally in order to support its efforts to attract long-distance transit passengers. In August 2014, the airline announced plans to acquire a 49% stake in Alitalia. The transaction received merger clearance from the European Commission in November 2014 and became effective on December 31, 2014. Etihad Airways is also undergoing a process of formalising an equity investment in Swiss-based Etihad Regional, which is operated by Darwin Airline.

Private Aviation

Al Bateen Executive Airport, the dedicated business aviation airport of Abu Dhabi Airports, saw an 18% increase in visiting aircraft traffic and a 6% rise in commercial aircraft traffic in 2013. Private airlines have linked up with national carriers in the region, offering customers more options with greater convenience and luxury.

Abu Dhabi Aviation is the largest commercial helicopter operator in the Middle East and the firm employs over 900 personnel, including over 150 pilots and approximately 150 aircraft maintenance engineers. Much of its business activity supports the offshore petroleum, engineering and construction industries. Its other business activities include medical evacuation, photography and charter, and it has expanded its operations to cover the region.

Ports & Shipping

The emirate’s major ports are owned by Abu Dhabi Ports, which was established in 2006. The largest facility is Khalifa Port, which opened in September 2012 and is located on a reclaimed offshore island 60 km west of Abu Dhabi City, roughly halfway along the road to Dubai. The port has an alongside draught of 18 metres and a channel draught of 16.5 metres, allowing it to receive the biggest ships in the world, in contrast to Zayed Port, was previously the emirate’s main maritime facility and which was primarily a feeder port.

Khalifa Port’s container terminal, which Abu Dhabi Ports describes as the region’s first semi-automated container port, is managed and operated by Abu Dhabi Terminals (ADT), a joint venture of Abu Dhabi Ports, state-owned investment firm Mubadala Development Company and Mubadala Infrastructure Partners. It is currently the emirate’s only container facility, as container operations at Zayed Port closed shortly after Khalifa Port opened. At present, the port can handle up to 2.5m twenty-foot equivalent units (TEUs) worth of containers and 12m tonnes of general cargo a year; however, capacity is set to eventually be expanded to 15m TEUs and 35m tonnes of cargo in line with market requirements.

“Khalifa Port will require additional investment to expand its capacity in order to keep up with the emirate’s increasing trade volumes. The first phase of expansion is already under way, while the second is set to begin in 2016,” Martijn van de Linde, CEO of ADT, told OBG. “All in all, the two phases will together provide enough capacity for an extra 2.5m TEUs.” The company is also planning to build the following phase at the site in approximately 10 years’ time.

Adjacent to Khalifa Port on the mainland is the trade and logistics zone Khalifa Industrial Zone Abu Dhabi, which is growing as a regional manufacturing and logistics hub supporting Khalifa Port, as well as the emirate’s importers and exporters. Among the current major tenants at the zone is Emirates Aluminium (EMAL), which runs one of the world’s largest aluminium smelters on the site. The firm operates under Emirates Global Aluminium, a 50:50 joint venture held by Abu Dhabi’s Mubadala (for EMAL) and the Investment Corporation of Dubai (for DUBAL). It also has a dedicated, purpose-built wharf at Khalifa Port. The company also has a 10-year agreement for Abu Dhabi Ports to handle all logistics involved in exports from the site. Khalifa Port also handles growing volumes of general cargo and, following the transition from Zayed Port, is the new location for the emirate’s roll-on/roll-off (RORO) cargo.

Zayed Port is the emirate’s oldest commercial port, having opened in 1972, and was the city’s main commercial port prior to the inauguration of Khalifa Port. Although its container operations have now been fully transferred to Khalifa Port and RORO cargo was moved to the new Khalifa Port RORO hub in early 2015, Abu Dhabi Ports has invested significantly in new equipment and is reconfiguring operations at Zayed Port in order to boost efficiency to support the growing volumes of general bulk cargo. In 2006 the port also began receiving cruise ships, a segment which has seen 189,000 cruise passengers passing through the emirate in 2013/14 and over 300,000 visiting cruise passengers expected by 2020.

To take advantage of the space freed up by the transfer of container operations, a new 8000-sqmetre cruise terminal is being constructed on the site and it is scheduled to be completed in 2016. The new terminal building will have space to support three cruise ships at a time and will be able to handle 2500 cruise passengers simultaneously.

Abu Dhabi’s third and final major commercial port is Musaffah, which serves the industrial zone of the same name located south-west of Abu Dhabi City. Abu Dhabi Ports also manages six smaller commercial, passenger, fishing and leisure ports, five of which are in Al Gharbia, the western region of the emirate.

Container Traffic

Abu Dhabi’s ports saw 35,770 goods vessel movements in 2013, down from 38,291 in 2012, according to data from SCAD. Container movements rose 14.6% year-on-year to 901,722 TEUs – nearly double the throughput of 521,156 TEUs achieved during 2010. In 2014 Abu Dhabi crossed the 1m TEUs mark in a single year and recorded a jump of 26% growth over 2013 container volumes. The Khalifa Port Container Terminal today hosts all of the major shipping lines, offering weekly direct calls to approximately 50 destinations worldwide.

Van de Linde told OBG that rapid growth in volumes is also set to continue over the medium term at least, driven by exports. “While imports into Abu Dhabi are set for a steady rise, exports will grow at a faster rate, spearheaded by industrial development. Consequently, container traffic is expected to see an annual increase of roughly 25% during the next four years,” he said. He added that the anticipated rise in export activity will help to improve efficiency and reduce prices. “We are moving towards a balance between both flows, which will help reduce shipping costs as containers will arrive and depart fully loaded, optimising vessel journeys.”

Vehicle Leasing

Fleet sales to corporate clients, hotels, tour operators and limousine firms continue to represent a major driver for the auto segment. Massar Solutions, which provides a wide range of services across fleet management, vehicle hire and supply chain solutions to government, semi-government and private sector clients in the industrial and commercial sectors, is just one of the operators in the segment that has shown significant growth.

Massar currently operates a business-to-business and business-to-consumer vehicle rental business under the Payless franchise of Avis Budget Group with a fleet of over 10,000.

Most recently, Massar has established a supply chain management solutions division, which effectively takes control of customers’ entire supply chain. Services include driver hiring, routing and scheduling, dispatching, fleet sizing, delivery management and documentation control.

“We see huge opportunities going forward in our line of business,” Paul Greenwood, CEO of Massar, told OBG. “This is due to the fact that we are ahead of the curve in adopting the most advanced technologies that take into account time and mileage. By utilising such technologies, more affordable rates can be provided to consumers while optimising the life and financial return of one’s assets.”

Also active in this segment is LeasePlan Emirates, the local subsidiary of the world’s largest vehicle leasing and fleet management player. A joint venture between Mubadala Development Company and LeasePlan Corporation, it offers a range of management services and acts in a consulting capacity.

Outlook

Transport infrastructure in Abu Dhabi is currently undergoing an important expansion process that is expected to continue in the coming years. Of particular note is the imminent launch of the emirate’s rail services and the accompanying expansion of the network, which will add a major new dimension to the emirate’s transport offering and improve cargo transport efficiency. Etihad Airways’ continuing expansion and the launch of the MTB will similarly support growth in air passenger numbers, and portside developments – particularly cruise ship access – will add a new means of arrival to the emirate. Finally, efforts to improve cycling and walking infrastructure, should help diversify transport activity, lessening the emirate’s reliance on private cars.

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The Report: Abu Dhabi 2015

Transport chapter from The Report: Abu Dhabi 2015

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