Flip through the latest issue of Gulf Weekly.
Record revenues earned from high oil prices have helped GCC countries draw ambitious infrastructure expansion projects for their aviation sector.
But with the global economic downturn biting and passenger traffic sinking, at least some of the GCC countries will be forced to rethink their expansion strategy.
It is estimated that there are currently more than $50 billion worth of aviation infrastructure projects in the Middle East, planned to cater to rising passenger traffic and freight demand on regional airports.
But currently the projected growth in passenger traffic has taken a hit. Air passenger traffic for the Middle East grew at seven per cent in 2008, a sharp deceleration from the 18 per cent growth seen in 2007, with much of the slowdown occurring primarily in the final months of the year.
The International Air Transport Association (IATA) believes that air passenger growth will remain in the single digits for the next few years as the more financially sound Middle East region begins to fully absorb the impact of the global slowdown.
In addition, the IATA points out airports that rely heavily on transit traffic between regions (such as Dubai Airport) will experience a sharper slowdown than others. On the flip side, aviation infrastructure expansion has a long gestation period meaning that by the time many of these projects are operational, the downturn may be over.
There is also the issue of satisfying existing demand in limited capacity airports such as in Saudi Arabia, Qatar and Kuwait, where the infrastructure does not satisfy current demand and so expansion is not only justified, but also necessary.
For aviation projects, as with most infrastructures, the GCC governments have been footing the bill, directing petrodollars into large-scale, long-term projects. A few projects include some form of private partnership, such as BOT schemes, but the respective governments inevitably contribute large sums to the endeavours.
With the global economic downturn, and subdued crude oil prices, most GCC governments have forecast significantly lower fiscal revenues while others have forecast deficits for the coming year.
This may hamper expansion efforts in the aviation industry, especially in those countries where projected passenger traffic is expected at near or below capacity. Having said that, it is worth noting the majority of GCC governments have gone full steam ahead on airport projects, though with some delays.
In terms of private sector involvement, some of these projects, especially those in Dubai, are funded by a consortium of banks and/or credit export agencies through long term lending. In light of the current global slowdown, it will become more difficult, not to mention more costly, to secure private sector funding on large scale, long term projects.
The region had also pinned its hopes on tourism boosting passenger traffic.
In recent years, the region has enjoyed increasing tourist traffic, especially in the UAE and Oman, both from within the region, in addition to tourists from Europe, Asia and Australia. Bahrain also is investing in the tourism sector and is committed to the 'open skies' policy. The number of air passengers passing through Bahrain airport totalled 8.6 million in 2008 a growth of 20 per cent year on year, while 368,000 tonnes of cargo were handled, a decline of two per cent over 2007.
Bahrain's passenger traffic has grown at CAGR of 11 per cent between 2002 and 2008. The Bahrain International Airport is being redesigned by Jacobs Gibb in association with HOK Architects and the local Bahrain consulting firm, Mohammed Salahuddin Consulting Engineering Bureau (MSCEB). The cost of the expansion is estimated to be $302.6 million and it is expected to be completed by 2013, taking the annual passenger handling capacity to 14 million with a cargo capacity of one million tonnes.
According to the Oman Chamber of Commerce and Industry, the value of planned tourism projects in the GCC for the next decade tops $230 billion, indicating that GCC nations are not concerned about a protracted downturn in the local tourism industry.
The chamber also says that in 2008 tourism in the Middle East grew at 11 per cent compared to a global rate of just two per cent. The World Tourism Organisation expects tourism growth in the Middle East to moderate to between 2-6 per cent in the coming year as the global slowdown is more acutely felt throughout the region.
The coming few years are likely to see a slowdown in the GCC aviation industry, say M R Raghu, head of research, and Layla Al Ammar, investment analyst at Kuwait-based Markaz.
"But capacity expansion plans have a long gestation period and we expect higher growth rates to resume by the time this capacity comes on-stream," they say.
The most sorely needed capacity expansions, those in Saudi Arabia, Kuwait, and Qatar, should be able to see completion as these resource-rich nations should have the reserves necessary to see these projects to completion should any private funding fall through.
The GCC countries that are not as resource-rich, and are therefore more reliant on private funding, may have to endure some delays in their aviation expansion projects.
