Relevant countries

The most relevant countries in the Gulf region in terms of airport infrastructure and growing aviation industry are the UAE and Qatar. These countries house the fastest growing carriers of the world: Emirates Airline, Etihad Airways, and Qatar Airways. Saudi Arabia is another important player in this sector due to the size of the country and its population, and growing religious tourism. The UAE, Qatar and Saudi Arabia account for more than 85% of the regional airlines’ fleet size.

Kingdom of Saudi Arabia

Saudi Arabia is literally one of the powerhouses among the Gulf States. It is officially known as the Kingdom of Saudi Arabia and is the largest state in the GCC. The country has a population of nearly 30 million people. With the largest oil reserves in the world it has a strong financial position.

Overall, the Saudi Arabian aviation market is standing on the threshold of change. The government is bringing about positive changes within the sector to boost its growth and thereby, the ability of its carriers to compete in the global market. In 2011, Saudi Arabia’s General Authority for Civil Aviation opened up the domestic market to private and foreign airline operators for further liberalisation. Consequently, Qatar Airways and Gulf Air have been granted licenses to establish new airlines in Saudi Arabia. As a result, Saudi Gulf Airlines (Dammam-based and owned by the Abdel Hadi Al-Qahtani & Sons Group) started operations in March 2016. The restriction of domestic operations by foreign carriers will change when Qatar Airways obtains regulatory approval to launch its subsidiary Al Maha Airways for the Saudi market.

In a bid to provide a level-playing field to the private operators in the country, in 2006, the Supreme Economic Council formulated a plan to privatise Saudia. The plan involved splitting the company into six private businesses, namely, catering, cargo, ground handling, maintenance, training, and the core airline unit. The privatisation plan gained momentum in 2007, when 49 per cent of the government stake in the catering division was sold to the Strategic Catering Company. In 2008, the carrier’s cargo unit was privatised, in 2010 the ground handling services and in 2013 its MRO unit.

Major carriers

Historically, the Saudi Arabian aviation market has been highly regulated, with its national carrier Saudi Arabian Airlines (Saudia) enjoying absolute monopoly. To boost capacity, in 2007 the country granted aviation licenses to two new players, flynas (formerly known as NAS Air) and Sama, of which the latter stopped operations in 2010. Despite the entry of new players, Saudia controls 94 per cent of the country’s domestic air travel market, while the remaining 6 per cent is handled by flynas, the country’s budget airline.

Saudia provides aviation services within Saudi Arabia and across the Middle East, Asia, Europe, and North America from its base, King Abdulaziz International Airport in Jeddah. Saudia receives financial and regulatory support from the government, primarily in the form of subsidized aviation fuel. The airline operates a fleet of 138 aircraft and transports around 70,000 passengers daily.

The low-cost carrier flynas operates with an all-Airbus fleet of 26 aircraft. The carrier’s performance has improved significantly in the recent past, after making an operational shift in focus to shorter routes. In 2012, flynas increased the number of its flights from Jeddah, Riyadh, and Dammam to deepen its domestic presence. After posting a profit in 2015 for the first time in its history, the low-cost carrier is talking to Airbus, Boeing and Bombardier about a potential order for 100 new aircraft. The airline is considering 60 new planes in the next five years with an option for 40 more in the future.

Airports

The Gulf region currently has 58 airports. Saudi Arabia has the highest number of airports at 33. Saudi Arabia is spending heavily on the expansion of its airports, including the Airport Development Phase I at King Abdulaziz International Airport in Jeddah, with an investment of around USD 1.5 billion. Also the other three major airports are undergoing expansion to cater for the growing air passenger traffic. These are the King Khaled International Airport in Riyadh, King Fahd International Airport in Dammam, and Prince Mohammed Bin Abdulaziz International Airport in Medina.

Key drivers
 

  • Large and growing population base: the population of this most inhabited country of the GCC is likely to grow to nearly 35 million people in 2020 (from 30 in 2015), thereby providing a large potential customer base to the aviation companies.
  • Religious tourism: Saudi Arabia is the hub of religious tourism in the Middle East. A growing number of pilgrims visits the holy Islamic cities of Mecca and Medina. It is expected that religious tourism will continue to drive the Saudi Arabian aviation sector in the future. Visitors for Hajj and Umrah reached a record 14 million in 2015. To cater to the growing traffic, Saudi Arabia is spending heavily on the expansion of its airports.
  • Liberalization: The Saudi Arabian government’s decision to open up the domestic aviation market to private players will result in the launch of two new carriers in the sector in 2016, adding to the competition.
  • Privatization of Saudia: The privatisation of the core airline unit of Saudia will make the sector more competitive, transforming into enhanced services for customers.

Qatar

Qatar has developed rapidly in recent years, benefitting from the revenues from the large oil and gas reserves. The country invests heavily in infrastructure, such as the construction of railways and the new Hamad International Airport in Doha. When it opened in April 2014 the passenger capacity was 29 million. In the coming years it will grow to 50 million passengers per year, which will make it the second largest airport in the region.

Qatar has seen an increase in air traffic due to its robust economic development, a rising population of foreign nationals, and the country’s emergence as a major destination for sporting events.

In 2012, the Qatar Foundation announced a USD 3.3 billion Aerospace City project in Al –Khor. But it was eventually put on hold because of the development of Education City and winning the bid for the organisation of the World Cup Soccer 2022.

Carriers

The national carrier Qatar Airways has evolved into one of the aviation industry’s biggest success stories. The five-star airline has since its launch in 1997 grown into a company with 175 aircraft (passenger and cargo) in operation and more than 320 on order and in option (Qatar Airways, Jan. 2016). The company has all current and new models from Airbus and Boeing in operation or on order. The average age of the aircraft is 5 years.

Qatar Airways’ huge fleet expansion is worth more than USD 70 billion and part of the airline’s global expansion plans for the next few years. In October 2013, Qatar Airways became the first Gulf-based carrier to join oneworld, an alliance of international airlines.

The low-cost carrier (LCC) segment in Qatar has yet to take off, evident from the fact that there are currently no budget carriers. However, budget carriers of other Gulf countries are fairly active in the country.

Qatar Amiri Flight is the VIP carrier for the royal family. Although the aircraft wear the colours of Qatar Airways, operation is completely separate.

Qatar holds the largest market for helicopter maintenance. It has the largest helicopter airport in the region, mainly to serve the local oil and gas industry. Gulf Helicopters, offering operation, maintenance, and training, currently has 45 machines, spread across facilities in Doha, India, Malaysia, and Saudi Arabia. In short time another 12 aircraft will be added to the fleet.

Airports

Riding on the success of Qatar Airways, Qatar built the new airport Hamad International Airport. The first phase opened in 2014, able of handling annual passenger traffic of 29 million. It replaces the former Doha International Airport and was built at a cost of USD 16 billion. Upon completion of all three phases, the airport capacity is expected to increase to around 50 million passengers per year. Before the opening of the new airport, the capacity of Doha International Airport stood at 12 million passengers per year. The old airport will be demolished and redeveloped as a new urban project called Al Sahan City.

Key drivers
 

  • Demography: Population in Qatar is expected to grow at a healthy annual rate of 4 per cent between 2013 and 2018, which bodes well for the country’s aviation sector. Further, the country’s population base is characterized by a large proportion of expatriates, which form an attractive target market for the national carrier.
  • Prosperity: Qatar has among the highest per capita incomes in the world. The county’s economy has registered healthy growth in the past few years and is likely to continue to do so in the future, driven mainly by the oil and gas sector. A high number of wealthy individuals and a thriving economy present strong growth potential for the country’s aviation market.
  • Tourism: Qatar is likely to see an increase in tourist arrivals, mainly backed by government efforts on promoting business/leisure tourism. Sports tourism, in particular, will continue to flourish in the future, with the country winning the right to host the 2022 World Cup. The country also hosts annual sporting events such as tennis and golf tournaments, which attract a large number of international tourists.
  • Development of a new airport: To enhance its passenger and cargo handling capacity, Qatar developed a new airport in Doha, Hamad International Airport, the first phase of which was opened in April 2014. Operations of all airlines moved to the new facilities in May 2014.
  • Positioning of Qatar Airways: Backed by an expanding fleet and good service quality, Qatar Airways is expected to play a material role in the GCC aviation market. To expand its operations, the carrier is expecting the delivery of over 320 new aircraft, in the next few years.

United Arab Emirates

The UAE government invests heavily in the development of the aviation and aerospace sector to diversify the economy away from overdependence on oil and gas. UAE companies and state agencies will spend over USD 136 billion until 2020 to make the country a global transport hub, says the Minister of Economy. The UAE could become home to one of the largest airline industries in the world.

In 2014, the country’s major international airports handled more than 100 million passengers for the first time in a single calendar year. It also saw Dubai International Airport dethrone London Heathrow from its decades long reign as the world’s largest airport for international passenger traffic.

Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, spearheads the country’s industrial plans for aviation. The company oversees plans to develop maintenance facilities for civilian and commercial aircraft, flight training, high-technology manufacturing for aircraft parts and research and development work. In Abu Dhabi’s second city, Al Ain, is a mix of public and private investment envisaged to create a dedicated aerospace and aviation cluster, the Nibras Al Ain Aerospace Park.

Strata, a Mubadala aerospace subsidiary set up to create an aerospace industry in the emirate of Abu Dhabi, has USD 7.5 billion worth of orders by Boeing and Airbus.

Dubai has emerged as the major air cargo hub of the Gulf region, mainly due to its world-class infrastructure. Both its airports, Dubai International Airport and Dubai World Central, are capable of facilitating fast transit of freight from sea to air. They harbour the capability to transfer full container loads between the quayside at Port Rashid or Jebel Ali to the Dubai International Airport, or vice versa, within as less as six hours. The UAE is at the core of the bustling aviation sector of the GCC and constitutes around 50% of the total fleet size of the GCC aviation sector.

Carriers

The country is home to two major international airlines, Emirates, based in Dubai and founded in 1985, and Etihad Airways, based in Abu Dhabi and founded in 2004. Both have been seeing annual growth in passenger numbers running at the double-digit mark for the past years. Both airlines have been expanding their fleets at breakneck speed. Both the airlines enjoy local government support as well as strong brand recognition due to their high service standards and international connectivity.

The leading LCCs in the Middle East, Air Arabia and flydubai, are also UAE-based and are gradually increasing their share in the short- and medium-haul passenger traffic segment.

Airports

The 3 major airports of the UAE, Dubai International Airport, Abu Dhabi International Airport and Sharjah International Airport handled 99.8 million passengers in 2014, a growth of 9.2%. Air passenger throughput will receive another major boost when Abu Dhabi’s expansions and Dubai’s new airport are fully operational.

Dubai International Airport (DXB) is the largest airport in the GCC and home base for carrier Emirates. It kept its position as the world’s busiest airport for international passengers for the second year after traffic exceeded 78 million in 2015. About 100 airlines connect the airport to 240 destinations around the world. The airport is set to reach the 100 million-passenger goal ahead of its target in 2020 based on current growth rates.

Abu Dhabi International Airport is set for major expansion, with the construction of the new Midfield Terminal at a cost of around USD 3 billion. The new terminal, scheduled to open in 2017, is expected to increase the passenger handling capacity from 23 million per year (2015) to around 55 million per year.

Sharjah International Airport is the third largest airport of the UAE and home base for the low-cost carrier Air Arabia. In 2015, it passed the 10 million mark for number of passengers, growing 5.5% compared to 2014 (9.5 million passengers).

Dubai will be able to truly unlock its growth potential as the biggest logistics hub in the world with its second airport Al Maktoum International at Dubai World Central (DWC). This new airport opened its doors to passengers in October 2013, cargo operations were launched in June 2010. The current USD 32 billion expansion project will enable the airport to accommodate more than 220 million passengers a year. The expansion will be built in two phases over six to eight years. Emirates plans to move to the new airport after 2020.

Key drivers

  • Favorable demography: A population growth of around 3% between 2013 and 2018 coupled with a high proportion of expatriates, who travel frequently to their native country, are likely to be key drivers for the UAE aviation sector.
  • Rising income levels: The UAE has one of the highest levels of GDP per capita in the Middle East. In the future, the income levels are likely to grow, resulting in the expansion of the ‘High Net Worth Individual’ segment. This augurs well for both business and leisure segments.
  • Growing reputation as a global aviation hub: With its strategic location and unmatched airport infrastructure, the UAE is poised to take advantage of growing air traffic between the eastern and western parts of the world.
  • Tourist influx: The UAE’s growing recognition as a leading destination for leisure and business travelers will continue to draw a large number of visitors to the country. This bodes well for the country’s aviation sector.
  • Expansion initiatives: The UAE’s key airlines as well as airports are undergoing substantial expansion aimed at increasing the overall capacity. Following the expansion, the country’s carriers will become better equipped at accommodating increased cargo and passenger traffic.