Middle East prepares to become the global hub of air travel

The growth of the Middle East’s aviation industry has been notable and has been further amplified as a result of the impact of the global economic slowdown on other regions. Despite the slowdown, the aviation industry in the region has expanded and is expected to grow further. This will mandate facility enhancement and the need for airport infrastructural development.

New analysis from Frost & Sullivan’s Middle East Airports Infrastructure Market, finds that Middle East airports will invest $86 billion in expansion plans. This is estimated to double after 2025, with major airports in the region pursuing their aim of becoming global hubs. This emerging dominance, coupled with an A380 order backlog of 50 percent of global deliveries, will drive the aviation industry as a whole in the Middle East.

“The emergence of the Middle East as a global hub in the future is attributed to the expansion of the 12 major airports across the region that constitute over 90 percent of the total investment of $86 billion in the region,” noted Frost & Sullivan Research Analyst Gautam Ratan Kanal. “The current economic slowdown will not impact the Middle East commercial aviation industry, and airport development activities will persist despite the slowdown, as most expansion activities are funded by governments in these countries.”

The cumulative effect of these factors is reflected in statistics related to market growth. Passenger traffic, cargo traffic, and aircraft movement across major airports in the region is expected to grow at a compound annual growth rate of 8.7, 8.5 and 4.8 percent respectively from 2008 to 2015. The Middle East is projected to be the only region that will witness an increase in traffic as a result of the growing demand for air travel in the region.

The Middle East airports infrastructure market is mutually interrelated to the growth in traffic at these emerging global hubs. The 12 airports in the region, despite handling a majority of the traffic, do not have the capacity to cater to the growing numbers and hence have called for large-scale expansion. With 57 percent of investments being allocated for construction and terminal expansion, the region is anticipated to offer significant potential for private infrastructural investors.

However, one of the main concerns for the market is the scarcity of land. Another key factor threatening market prospects is the political heterogeneity across the region.

“It is vital for governments to clearly identify their limitations and act accordingly for the welfare of the industry and the region,” cautioned Gautam Ratan Kanal. “The lack of technically-skilled labor, unfeasible labor costs, and scarcity of land are likely to hamper market growth in the region.”

Following build-operate-transfer (BOT) models for expansion, with the grant of concession to private operators, is regarded as a solution to overcome these challenges. Private investors that have government backing will be in a better position to smoothly execute expansion and operation plans.

“The civil aviation authorities of respective airports need to examine private participation in expanding and operating airports in order to leverage operational efficiencies,” concluded Gautam Ratan Kanal.