The sky’s the limit: Investment in a new airport and the growth of the national carrier are propelling the aviation industry forward

Over the past two decades, the Gulf region has become home to a growing number of airlines as national carriers have emerged in Qatar, the UAE, Bahrain and Saudi Arabia. Three of these – Qatar Airways (QA), Emirates and Abu Dhabi’s Etihad – have grown far beyond the region, becoming some of the industry’s largest players. The impact of their success is visible. The Middle East aviation sector grew faster than any other region, with carriers recording an increase in passenger traffic of 12.1% for 2013, well above the global average of 5.4% for the year, according to figures from the International Air Transport Association. Carriers expect growth to continue, as well. The Middle East as a whole will spend about $470bn on 2370 new planes between 2013 and 2031, Marty Bentrott, Boeing’s vice-president of sales for the Middle East, Russia and Central Asia, told Abu Dhabi daily The National in September 2012.

Qatar has played an instrumental role in the region’s ascent to the top of the global aviation industry. In a relatively short time, the state has built up a competitive national carrier and is now putting the finishing touches on a long-awaited new airport in Doha. The completion of the new facility, combined with the steady growth of national flag carrier QA, is expected to help take the aviation industry even further. The new facility will allow for higher passenger and cargo throughput, and support value-added areas like aviation logistics.

High Flying

The establishment of Qatar’s national carrier has been a key part of laying the groundwork for the state’s aviation industry. Qatar and its Gulf neighbours were served by foreign-owned entities until 1973. In that year, the governments of UAE, Bahrain, Oman and Qatar purchased the British Overseas Aircraft Corporation’s shares of Gulf Aviation Company. A year later the four governments signed a foundation treaty, creating the jointly owned carrier that eventually became Gulf Air.

One by one, however, the signatories began to peel away from the Gulf Air consortium and launch their own ventures, leaving Bahrain in charge. Dubai-based Emirates’ story is illustrative in this regard. In 1985, it began operations, wet-leasing two aircraft from Pakistani International Airways to operate flights between Dubai and the Indian subcontinent. Since then the carrier has grown into the one of the world’s largest, transporting over 39m passengers to more than 120 destinations in 2012/13.

Like its neighbour to the south, Qatar pulled out of the Gulf Air consortium in 1993, when it created QA under the private ownership of the royal family. Relaunched in 1997, QA moved quickly to catch up and establish itself as a regional force.

Results so far have been promising. Like Emirates, QA successfully leveraged its geographic position at the intersection of three continents to enter the global aviation market. The carrier cast a broad net, expanding routes to 120 destinations and clocking an average growth rate of 30% per annum. With a young and fuel-efficient fleet, QA continues to tap traditional markets in Europe and North America as well as developing markets in East and South Asia. The carrier served 14.3m passengers in 2012 and estimates that number will reach 17m by the end of 2013, according to CEO Akbar Al Baker. While as a privately owned firm it does not release regular financial statements, QA representatives indicated positive results in recent years. In the 2011/12 financial year, the firm said its earnings increased, but profits dropped due to oil costs. “Profit on an earnings before interest, taxes, depreciation and amortisation level was 47% above the previous year, but on a net level we made a small loss. For the 2010/11 financial year, we made a large profit.”

A New Hub

As QA continued to grow throughout the past decade, so too did traffic at Doha International Airport (DIA). Between 2007 and 2012, annual passenger numbers more than doubled from 9.5m to 21.2m, according to the DIA. The airport experienced a 10% growth in traffic in 2013, with over 23.2m passengers visiting. Cargo, on the other hand, grew even faster during 2007-12, more than tripling from 247m kg to 826m kg. In 2013 the cargo segment saw year-on-year growth of 4.7% While a successful national carrier and increasing business are both positive signs for DIA, rapid expansion has brought with it growing pains. Without sufficient runway space to accommodate increased incoming aircraft, DIA has come to rely on a fleet of buses that ferry passengers back and forth between parked jets and the airport terminal. The terminal itself has also been extremely busy. In June 2013, which is the start of the airport’s high season, DIA issued an announcement that passengers should arrive at the airport at least four hours before their flights’ scheduled departures during peak hours. The authorities recognise that these are stop-gap measures, and a new airport, Hamad International (HIA), is under construction. Its first terminal was set to come on-line in 2009, but has been delayed.

In 2012, airport authorities said after a change in contractors that construction would finish in April 2013. The night before the opening, however, airport authorities announced another delay due to safety and security requirements. In January 2014, Abdul Aziz Mohammad Al Noaimi, chairman of the New Doha International Airport Steering Committee, announced that the airport was on track for a phased opening by mid-year 2014. With DIA predicting steady growth in cargo and passenger numbers, HIA cannot come on-line soon enough. Upon completion, HIA’s two terminals will increase capacity to 50m passengers and 2.5m tonnes of cargo.

Value Added

To better utilise new capacity, the airport’s planners are constructing Airport City, which will house 200,000 people near HIA and link the facility to its employees and businesses.

“The Airport City concept is relatively new to the region,” Bernardo Gogna, project director of the New Doha International Airport Steering Committee, told OBG. “Qatar will be one of the few countries in the Middle East that will have an integrated urban space that seamlessly connects the airport, the logistics industry, manufacturing, commercial businesses and the travel industry.” In Dubai, the creation of dedicated aviation areas has facilitated significant improvements in logistics performance. In 2011, aviation represented nearly 20% of employment and 30% of the GDP in the emirate, according to the Dubai Civil Aviation Authority.

Qatar’s logistics industry, which is already benefitting from billions in ports and roads investments, will also be a likely beneficiary of QA’s growth and the new airport’s completion. Sectors like tourism, retail and real estate all stand to gain larger customer bases from international visitors. Aviation represents more than an economic end for authorities, however. Strong air connections are also a means of achieving political ambitions. QA’s direct connections to six continents help make the state a convenient venue for international conferences and political meetings. “The airline illustrates the increasing global role Qatar seeks to play,” Hassan Al Ibrahim, the co-founder of Fikra, a Qatari think tank, told The National in September 2012. “In a way, QA shows how Qatar’s soft power grew far beyond its borders.”