Dubai airport in overdrive; arbitrages between East, West

Success likely to draw new rivals even as the Emirates forges ahead with major expansion plan.

By MICHAEL GRUBB/THE MEDIA LINE
November 29, 2010 13:19
3 minute read.
Dubai International Airport

Dubai planes 311. (photo credit: The Media Line)

Dubai International Airport, the largest in the Gulf, is outpacing the world aviation industry’s recovery this year as it capitalizes on its role as a pivot for business travelers arbitraging between a struggling Europe and the burgeoning economies of Asia. But analysts warn that Dubai’s success makes it a likely magnet for new competition.

Traffic through Dubai International rose by close to 16 percent in the first nine months of the year, putting well ahead of the12.9% average increase in the Asia-Pacific market, making it the world’s fastest growing, according to Airports Council International. The pace of growth for Dubai continued in October, when traffic exceeded four million people for the second time ever, Dubai Airports reported Wednesday.

Be the first to know - Join our Facebook page.


RELATED:
Jumbo offers internet above the clouds            
Police search Emirates plane at London's Gatwick airport 

Aviation is a big and thriving business for tiny Dubai, whose economy is otherwise struggling with some $100 billion of real estate debt. Dubai is home to the world’s 14th-busiest airport, just behind New York John F. Kennedy Airport and ahead of Amsterdam’s Schiphol. The number of people passing through the airport in October alone was equal to more than twice the country’s entire population.

Dubai Airport has ambitious plans for expanding. Annual capacity at Dubai International will grow from 60 million passengers to 75 million next year when it dedicates Concourse 3, the world’s only facility dedicated to servicing the Airbus A380, the largest passenger airliner in the world.

Meanwhile, a second airport, called the Al-Maktoum International, is under development next door. Al-Maktoum began cargo operations six months ago and will be opening for passenger travel in March 2011.

Dubai Airport is expecting growth to continue at a strong double-digit rate in 2011, with annual passenger traffic jumping 13.1% to 52.2 million from a forecast 46.1 million for all of 2010. Dubai’s flag carrier Emirates is counting on its passenger numbers growing 10% next year while the discount carrier Flydubai forecasts its traffic doubling.

“Before the end of the decade passenger numbers will approach 90 million making Dubai International the busiest airport in the world in terms of international passenger traffic,” Paul Griffiths, chief executive officer of Dubai Airports, said last week.

But Dubai’s airports – and its airlines -- are vulnerable to emerging competition because it is entirely dependent on funneling passengers from Europe and Asia through its airports and sending them on to their final destinations, he said. The airport has no domestic market and a tiny regional one. Indeed, measured by international traffic alone, Dubai rises in the world airport rankings to No. 6.

“They will have competition, the dynamics will definitely change,” Philip Butterworth-Hayes, lead consultant of the aviation advisory firm PMi Media, told The Media Line. “I would look at Indian airlines in particular. Once you have a strong home market like India, you have the ability to capture traffic.”

Dubai has not only benefited from huge investment in its airport and carriers but also from low costs, the absence of environmental constraints to airport expansion and its strategic location. Demand for Europe-Asian travel has grown as European companies focus sales on the growing economies of China and the rest of Asia while newly wealthy Asians have the disposable income to travel to Europe for holidays. Dubai is about 5,500 kilometers (3,400 miles) from London and 6,400 kilometers (4,000 miles) from Shanghai.

Adding to world-class airports, Dubai’s state-owned Emirates airlines has been an aggressive competitor, taking market share from hobbled European rivals by adding capacity – the airline has the biggest fleet of the giant A380s on order – and is keeping fares and costs low. 

But India could match many of these assets. Mumbai, the country’s commercial capital is about 7,200 kilometers (4,500 miles) from London and 5,000 kilometers (3,100 miles) from Shanghai, on top of being a business and tourism destination in its own right.

As India’s economy grows, demand for domestic air travel for its one billion people has also increased. Domestic air traffic in India grew 15% in October compared with a year ago to 4.6 million passengers, the government said last week. What the country still lacks to take on Dubai  is a competitive airline to service an Indian hub, Griffiths said.

“If you were to have an Emirates-like operation in India, you could make it a major hub,” he said. “But they would also benefit from the presence of a huge domestic market.”


Related Content

MOQTADA AL-SADR has won the largest number of seats in Iraq’s parliament.
May 21, 2018
Elections in Iraq: The third incarnation of Sadr

By SETH J. FRANTZMAN