Oxford Economics Report

Economic benefits of
improvements to Middle East

air traffic control
August 2015
Kareen El Beyrouty
Andrew Tessler
A report for NATS
Contents
Executive Summary
Introduction ..................................................................................... 3
1.1
1.2
1.3
Purpose of this report ................................................................................. 3

Trends in aviation in the Middle East ......................................................... 3
Structure of the report ................................................................................ 6
Benefits of air traffic improvements to the Middle East ............... 8

2.1
2.2
2.3
Geography and products ............................................................................ 8

Model construction ..................................................................................... 8
Model inputs ............................................................................................... 9
2.3.1 Average tactical delay per flight ......................................................... 9
2.3.2 Passenger values of time................................................................. 10
2.3.3 Proportion of regional passengers ................................................... 10
2.3.4 Delay costs to airlines ...................................................................... 10
2.3.5 Air traffic movements ....................................................................... 11
2.3.6 Distribution of increased delays through to 2015 ............................ 11
2.3.7 Discount rate .................................................................................... 11
2.4 Model results ............................................................................................ 12
Benefits of air traffic improvements to Oman ............................. 13

3.1
3.2
3.3
3.4
Aviation in Oman ...................................................................................... 13

Products ................................................................................................... 14
Model construction ................................................................................... 14
Model inputs ............................................................................................. 15
3.4.1 Average tactical delay per flight ....................................................... 15
3.4.3 Proportion of local passengers ........................................................ 16
3.4.7 Discount rate .................................................................................... 17
3.5 Model results ............................................................................................ 17
Benefits of air traffic improvements to Qatar .............................. 19

4.1
4.2
4.3
4.4
Aviation in Qatar ....................................................................................... 19

Products ................................................................................................... 19
Model construction ................................................................................... 20
Model inputs ............................................................................................. 21
4.4.1 Average tactical delay per flight ....................................................... 21

4.4.3 Proportion of local passengers ........................................................ 22
4.4.7 Discount rate .................................................................................... 23
4.5 Model results ............................................................................................ 23
Executive Summary
Oxford Economics was commissioned by NATS to develop estimates of the
economic efficiency gains from potential improvements to air traffic control in the
Middle East, with separate figures also being developed for Oman and Qatar.
For the purposes of this report the Middle East includes the GCC countries
(Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) as
well as Iran and Iraq.
The model constructed for this analysis is based on an economic efficiency
framework and is aimed at assessing the economic welfare benefits of
improvements to air traffic control in the Middle East. This type of approach is
favoured by economists who wish to understand the net economic gains of an
initiative or, equivalently, losses from the absence of an initiative - to
consumers, producers and the economy as a whole.
Under this framework, gains to air passengers from an improvement in air traffic
control in the Middle East (e.g. from faster travel times) are considered
consumer surplus, while gains to airports, airlines, and air navigation service
providers (ANSPs) (e.g. from reduced fuel costs or increased revenues)
constitute producer surplus. The sum of producer and consumer surplus
represents the economic gain to the Middle East as a whole.
Two types of potential responses to improvements in air traffic control were
initially considered, namely:
a decrease in average delay minutes for passenger flights arriving and departing and
overflights flying over Middle East airspace; and
an increase in the number of flights, either arrivals/departures and/or overflights.
The first potential response, a decrease in average delay minutes for passenger
flights (arrivals/departures/overflights) was included in the model. Discussions
with Middle East aviation experts resulted in the conclusion that it is likely there
would be an increase in the number of east/west overflights as a result of air
traffic improvements (thereby generating additional income for ANSPs).
However there is no agreement about the significance of such a factor and
accordingly, we have not quantified this factor in this report.
The base case (do-nothing) is the current state of aviation traffic in 2015. The
option case represents the economic benefits of avoiding a hypothetical
doubling of delay minutes by 2025 by implementing air traffic control
improvements. The time horizon considered in this analysis spans a ten year
period, starting at 2015 and ending at 2025. Using the inputs detailed above, a
welfare-based model was built to estimate the passenger benefits and the airline
benefits.
The net present value of these gross benefits was estimated as USD 16.3
billion for the Middle East as a whole for the period 2015-2025. In terms of the
distribution of benefits, 44 percent of this surplus would go to passengers and 56
percent to airlines.
1
A similar approach was also adopted to assess the economic benefits of air
traffic control improvements in Oman. The net present value of these gross
benefits sum to USD 595 million for Oman for the period 2015-2025. In terms of
the distribution of benefits, 41 percent of this surplus would go to passengers
and 59 percent to airlines.
A third model was also constructed for Qatar. In Qatar, the gross economic
benefits of air traffic control improvements in net present value terms sum to
USD 1,536 million for the period 2015-2025. In Qatar, 60 percent of this surplus
would go to passengers and 40 percent would go to airlines.
Tables and charts illustrating model inputs and outputs are provided below.
Table 1: Model inputs
Model Inputs
Average tactical delay
per flight (Minutes)
Middle East
Oman
Qatar
Average tactical delay

per flight attributed to Average VoT ($)
ATC (Minutes)
36
27
37
29
22
30
Proportion of local
passengers (%)
0.47
0.62
2.52
50
33
14
Table 2: Model outputs

Model Outputs
Middle East
Oman
Qatar
Net benefits sum ($,

Million)
Passengers' surplus
(%)
Airlines' surplus
(%)
16,337
595
1,536
44
41
60
56
59
40
Chart 1: Air Traffic Control (ATC) net delay costs in the Middle East, Oman
and Qatar from 2015-2025
USD Billions
10
9
8
7
6
5
4
7.22
3
2
0.91
0.24
1
0
ATC delay cost to passengers
Middle East
9.12
0.35
0.62
ATC delay cost to airlines
Oman
Qatar
1 Introduction
1.1
Purpose of this report
Oxford Economics was commissioned by NATS to develop estimates of the

efficiency gains from potential improvements to air traffic control in the Middle
East, with separate figures also for Oman and Qatar.
For the purposes of this report the Middle East includes the GCC countries
(Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) as
well as Iran and Iraq.
There is a plethora of prior work on the economic contribution of aviation to the
Middle East. However, the scope of much past work focuses on the
unconstrained impacts of aviation investment at the present time. In contrast this
report focusses on examining the effects of potential constraints which could
arise from an absence of investment in regional air traffic control. The economic
benefit of relieving such constraints is estimated for the region, Oman and Qatar.
1.2
Trends in aviation in the Middle East
At the present time, the Middle East region carries a 5 percent share of global
passenger traffic and over the past decade the region has become one of the
1
worlds most important aviation hubs. Recent work by ATAG on the economic
contribution of air transport in the Middle East shows that it supports two million
2
jobs and USD 116 billion in GDP for the region. This activity had its genesis in
the 1970s, when governments across the Middle East began to turn to investing
in their aviation industries as a way to diversify away from oil revenues and turn
3
towards becoming a global centre for commerce and trade. There are several
factors at play in the rise of aviation in the Middle East: the regions strategic
geographic location between Europe and Asia, increasing inbound tourism to the
region, and large airport developments across the region.
Middle East airlines are expanding their networks by increasing their closeness
centrality, an expansion by which new routes are offered to customers (e.g.
4
London-Dubai-Sydney rather than London-Singapore-Sydney). Implicit in this
mode of aviation expansion is direct competition with other global aviation hubs
Air Transport Action Group (ATAG), Aviation: Benefits Beyond Borders (2014),
42.
2
Ibid.
Jan Vespermann, Andreas Wald and Ronald and Gleich, "Aviation growth in
the Middle East - impacts on incumbent players and potential strategic
reactions", Journal of Transport Geography, 16 (2008): 388-94.
4
Ibid.
3
in order to take market share. By expanding routes on offer, Middle East airports
do not only rely on domestic demand for air travel or international demand for air
travel to the Middle East, but also on transfer passengers routing via the Middle
East.
Indeed, the Airports Council International recently ranked Dubai as the sixth
busiest airport in the world for passenger traffic and as the worlds busiest airport
5
in terms of international passenger traffic. Passenger traffic at the airport rose
6
from 47 million in 2010 to 70 million in 2014, a 49 percent increase. The rapid
rise of Dubai in the global ranking of aviation hubs is strongly tied to the
expansion of Emirates airlines, which now flies the worlds largest fleet of long7
haul passenger airplanes.
Two other major regional aviation hubs, Doha and Abu Dhabi have also
experienced outsized growth, bolstered by major airport developments and the
growth of their national carriers, Qatar Airways and Etihad. Passenger numbers
grew 166 percent in Qatar over the 2006 to 2014 period, with significant year-onyear increases from a base of 3.7 million passengers in 2006 to 9.8 million
8
passengers in 2014. Abu Dhabi Airport carried more than 16.5 million
passengers in 2013, more than triple the 5.4 million passengers recorded in
9
2006. A new terminal opened in 2009 at Abu Dhabi Airport, and yet another
new terminal, the Midfield Terminal Complex, is set to open in coming years.
This terminal alone is designed to carry 30 million passengers per annum.
Overall, the OAG, who provide aviation information and analytical services
sourced from its aviation databases, predicts a 10 percent annual growth rate for
10
the growth of the aviation fleet in the Middle East. Moreover, aviation capacity
in the Middle East currently compares favourably with that of other regions.
Passenger and freight tonne kilometres offered per unit of GDP meet US levels
11
and even exceed the levels of European countries. The charts below show
both the growth in departures and passengers for the region from 2007-2013.
Airports Council International, "ACI World releases preliminary world airport

traffic and rankings for 2014 - DXB becomes busiest airport for international
passenger traffic - Mar 26, 2015," 2015
6
http://www.dubaiairports.ae/corporate/media-centre/fact-sheets/detail/dubaiairports
7
Joel Lewin, "Dubai replaces Heathrow as busiest airport", Financial Times, 12

January 2015.
8
IATA and Oxford Economics, "Air Passenger Forecasts Data" June 17, 2015.
http://www.abudhabiairport.ae/english/airport-information/about-abu-dhabiairport/introduction.aspx
10
OAG Market Intelligence, India and the Middle East Aviation Market Analysis
(October 2011), 4.
11
Jurgen Ringbeck and Fadi Majdalani, Booz & Co.: Mastering the Challenges
of The Middle East Aviation System (2008), 2.
4
Charts 1.1 and 1.2: Passenger and aircraft departures growth in the Middle
East, 2007-2013
Million
180
Passengers carried
% growth in passengers carried
%
25
160
20
140
120
15
100
80
10
60
40
20
0
0
2007
2008
2009
2010
2011
2012
2013
Source : ICAO
Thousand
1200
Aircraft departures
%
20
% growth in departures
1000
15
800
600
10
400
5
200
0
0
2007
2008
2009
2010
2011
2012
2013
Source : ICAO
In addition, the Middle East is investing heavily in tourism promotion, attracting

more inbound traffic. Overnight tourist arrivals increased by 27 percent across
the region from 2007 to 2013. A further 92 percent increase from 2013 to 2024 is
forecast, with GCC countries experiencing slightly higher rates of tourism
12
growth. At the forefront of tourism promotion and development within the GCC
region is Bahrain, with travel and tourism contributing 10 percent to its GDP and
13
providing for a similar percentage of jobs in 2013. As with aviation, tourism is
12
Oxford Economics, Tourism Decision Metrics Databank, accessed

27/04/2015.
13
Ibid.
5
an important avenue for diversification away from the oil sector, as well as a
sector that generates a substantial amount of employment.
1.3
Challenges for aviation in the Middle East
Like airlines in the region, airports in the region have also engaged in substantial
growth programmes to supply more capacity. For example, Dubai opened a
second airport in 2010, initially for cargo operations, with the first passenger
operations taking place in 2013. It is designed to become the worlds largest
airport with capacity for 160 million passengers and 12 million tonnes of air
14
freight per year.
The regions available airspace and air traffic capability, however, has not kept
up with the regions ambition. The regions air traffic management has split into
different bodies, going from one Flight Information Region (FIR) in Bahrain in
15
16
1954 to six distinct ones starting in the early 1980s , with handover between
17
the regions creating delays in flight times. In addition, approximately half of the
Middle East airspace is reserved for military flights, further exacerbating the air
18
traffic control congestion.
The challenges facing air traffic control are recognised throughout the region
and initiatives have been established to quantify and address the issues,
however the pace of progress often does not meet the pace of continued traffic
growth. An example of such an initiative is the MID ATM Enhancement
Programme (MAEP) led by ICAO, which provides a regional collaborative
platform for planning and implementing air navigation projects in support of the
MID Air Navigation Strategy 2014-2028. Also, a Project Management
Organisation has been established to develop a MAEP Master Plan, identifying
quick win initiatives and determine funding requirements. This report illustrates
some of the benefits that could arise from initiatives to improve air traffic control
management in the region.
1.4
Structure of the report
The remainder of the report is structured as follows:
14
http://www.dubaiairports.ae/corporate/media-centre/fact-sheets/detail/dubaiairports
15
http://www.bahrainairport.com/about-us/our-history/aviation-in-bahrain.html
16
IATA, Support Gulf Success with Regional Cooperation and Global

Standards, http://www.iata.org/pressroom/pr/Pages/2014-04-07-01.aspx
17
Alan Dron, "Steep Growth At A Cost For Middle East Carriers", Aviation Week,
2/2/2015.
18
Ibid.
6
Chapter 2 describes the benefits of air traffic improvements to the Middle East region.
Chapter 3 describes the benefits of air traffic improvements to Oman.
Chapter 4 describes the benefits of air traffic improvements to Qatar.
2 Benefits of air traffic improvements to

the Middle East
2.1
Geography and products
The geographical region included in this assessment of air traffic in the Middle
East includes the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia,
and the United Arab Emirates) as well as Iran and Iraq.
The type of traffic considered in this model consists of passenger traffic, for the
reason that improvements to air traffic control in the Middle East would mostly
benefit passenger traffic. There would be some additional benefit to cargo, but
that benefit is minute compared to the potential benefit for passenger traffic.
2.2
Model construction
The model constructed for this analysis is based on an efficiency framework,

focussing on the economic welfare benefits of improvements to air traffic control
in the Middle East. This type of approach is favoured by economists who wish to
understand the net economic gains of an initiative - or, equivalently, losses from
the absence of an initiative - to consumers, producers and the economy as a
whole.
Under this framework, gains to air passengers from an improvement in air traffic
control in the Middle East (e.g. from faster travel times) are considered
consumer surplus, while gains to airports, airlines, and air navigation service
providers (ANSPs) (e.g. from reduced fuel costs or increased revenues)
constitute producer surplus. The sum of producer and consumer surplus
represents the economic gain to the Middle East as a whole.
More formally, the consumer surplus represents the difference between what
consumers pay and the maximum price they would be willing to pay for aviation
services and the producer surplus represents the difference between the price
received by producers (airports, airlines, ANSPs) and the marginal costs of
supply.
a decrease in average delay minutes for passenger flights arriving and

departing and overflights flying over Middle East airspace; and
an increase in the number of flights, either arrivals/departures and/or

overflights.
8
with Middle East aviation experts resulted in the conclusion that it is likely there
would be an increase in the number of east/west overflights as a result of air
traffic improvements (thereby generating additional income for ANSPs).
However there is no agreement about the significance of such a factor and
accordingly, we have not quantified this factor in this report.
The base case (do-nothing) is the current state of aviation traffic in 2015. There
are no firm data on how air traffic control delays may increase in the next
decade. However, the approach taken is this study is to postulate a doubling of
such delays by 2025 if no action is taken to improve air traffic control systems.
This serves as a guide to policy makers as to the potential significance of such
impacts on passengers and airlines. Accordingly, the option case presents the
economic benefits of avoiding this hypothetical doubling of delay minutes by
2025 by implementing air traffic control improvements (or alternatively, the
economic costs of a doubling of delay minutes). As indicated, the time horizon
considered in this analysis spans a ten year period, starting at 2015 and ending
at 2025.
2.3
Model inputs
The key model inputs are described below.

2.3.1
Average tactical delay per flight
The most important input to the model is the average tactical (i.e. unexpected)
delay per flight. NATS supplied Oxford Economics with flight data from
Flightstats for the busiest airports in each of the countries considered for seven
19
days in June 2015. Total average delay was calculated by looking at the
difference between scheduled gate departure/arrival time and actual gate
20
departure/arrival time. The average flight delay for the region was
approximately 36 minutes; however, not all of this delay is attributable to air
traffic control.
Given that publically available data on the precise sources of air traffic delays in
the Middle East doesnt exist, we used EUROCONTROL airport ATFM delay
data for 2008-2014, excluding the effects of weather (which are much smaller in
21
the Middle East) as a guide. Averaging these data over these years suggests
82 percent of total delays could be attributable to air traffic
control/capacity/staffing issues.
19
Data were gathered for Baghdad, Bahrain, Doha, Dubai, Jeddah, Riyadh,
Sharjah, Kuwait, Tehran, Abu Dhabi, Dammam, and Muscat.
20
Arrival delays were calculated net of any departure delays.
21
See http://www.eurocontrol.int/prudata/dashboard/eur_view_2014.html
This cuts down the delay minutes attributable to air traffic control from 36 to 29
in 2015. For 2025, it was posited that delay minutes would double to 59, absent
improvement in air traffic control.
2.3.2
Passenger values of time
An important benefit of decreased flight delays is the value of that time saved for
passengers. As data does not exist for the Middle East, we used the value of
time for the UK, calculated using recent surveys done by the UKs Airports
Commission for business trips and EUROCONTROL values of time for leisure
22
trips. These values of time (VoT) were converted to USD at Purchasing Power
23
Parity (PPP) exchange rates. Two sets of values of time were used, one for
business passengers and one for leisure passengers, yielding a per minute USD
1.31 VoT for business passengers and a per minute USD 0.48 VoT for leisure
passengers.
A weighted average VoT was then calculated for the Middle East using a 14
percent business passenger split and an 86 percent leisure passenger split. An
adjustment factor of 0.73 was used to take into account the difference in
average GDP per capita on a PPP basis for the region and that of the UK for
business trips and one of 0.8 to account for the differences between the EU and
the region for leisure trips. The split by purpose of travel was estimated using
data on tourism arrivals by purpose, produced by Oxford Economics. The final
weighted average figure for VoT was USD 0.47 per minute for each passenger.
2.3.3
Proportion of regional passengers
To estimate the consumer surplus for passengers, it was assumed that 50

percent of passengers were regional passengers. This is consistent with
previous Oxford Economics estimates for Saudi Arabia and is in line with the
24
proportion of residents in other markets.
2.3.4
Delay costs to airlines
In addition to passenger delay costs, there are also delay costs to airlines.
Delays were estimated in the same way as for passenger delays. Delay costs
per minute of USD 40 were estimated based on the University of Westminster
22
Airports Commission, Economy: Delay Impacts Assessment Methodology

Paper, (November 2014), 6. and Eurocontrol 6th ed. (September 2013),
Standard Inputs for Eurocontrol Cost Benefit Analysis
23
As UK inflation is close to zero for 2015, no adjustment was made to inflate

the 2014 values to 2015 values.
24
Oxford Economics (2011) Economic Benefits of Air Transportation Saudi

Arabia
10
(2011) and EUROCONTROLs Standard Inputs for Cost Benefit Analyses for
25
tactical delays without network effects.
2.3.5
Air traffic movements
Internal Oxford Economics forecasts for air passengers in the region were
converted to Air Traffic Movements (ATMs) using an average of approximately
117 passengers per flight. This average was calculated using the ratio of
passengers to ATMs in the Middle East from the Airports Council International
26
2014 Preliminary World Airport and Traffic Rankings.
2.3.6
Distribution of increased delays through to 2025
For this model, it was assumed that delays would increase in a linear trend from
2015 to 2025 without an improvement in air traffic control. By 2025, delays
would be double those of 2015. Chart 2.1 below shows the resulting distribution
of gross delay costs for airlines and passengers for each year of the model.
Chart 2.1: Gross delay costs for airlines and passengers, 2015-2025
USD Million
120
100
80
ATC gross delay cost to

airlines
passengers
60
40
20
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
2.3.7
Discount rate
As per EUROCONTROL guidelines, a 4 percent discount rate was used.
27
25
University of Westminster (2013) European airlines delay cost reference

values: Final report and EUROCONTROL, Standard Inputs for EUROCONTROL
Cost Benefit Analyses, 6th ed. (September 2013), p. 11
26

27
EUROCONTROL, Standard Inputs for EUROCONTROL Cost Benefit

Analyses, 6th ed. (September 2013), 48
11
2.4
Model results
Using the inputs detailed above, a welfare-based model was built to estimate the
passenger benefits and the airline benefits. Benefits to ANSPs were not included
in this model, as additional flights were not modelled. Together, these benefits
represent the combined consumer and producer surplus (benefits) as a result of
potential air traffic control improvements in the Middle East. The consumer
surplus (shaded in blue) of USD 7.2 billion represents the total benefits that
airline passengers would receive over the 2015-2025 period. Likewise, the
producer surplus (shaded in green) of USD 9.1 billion corresponds to the total
benefits airlines would receive over the same period.
The sum of producer and consumer surplus is known as the gross benefits of
improved air traffic control. The net present value of these gross benefits was
estimated as USD 16.3 billion for the Middle East as a whole for the period
2015-2025. In terms of the distribution of benefits, 44 percent of this surplus
would go to passengers and 56 percent to airlines.
Chart 2.2: Distribution of benefits between passengers and airlines in the
Middle East
$, Billion
S
$ 7.2 billion
Consumer surplus
Producer surplus
44%
56%
$ 9.1 billion
D
Quantity
12

Oman
3.1
Aviation in Oman
Omans first airport dates back to 1929 and it was mainly for military purposes.
In the 1960s, Gulf Air began flying its DC3 Aircraft through Bait Al Falaj Airport
and in the 1970s, Pakistan and British Airways began flying semi-regular
passenger flights out of the airport. In 1973, Muscat Airport (formerly known as
Seeb Airport) opened and by the end of the first year of operation, 87,200
28
passengers had flown via the airport. The national carrier, Oman Air, began
29
operations in 1993.
Aviation expansion in Oman is designed to serve Omans ambitions as a tourism
destination. Muscat International hosted over 8 million passengers in 2013, an
30
increase of 10 percent from 2012. Oman is planning for even more growth and
over the next decade plans to build six new runways and four new regional
31
airports. At Muscat International, the existing runway was recently upgraded.
Furthermore, a new parallel runway and a new terminal (designed to hold 48
mppa by 2050) will soon open. At Salalah airport, a new terminal building
designed to hold up to 4 mppa went operational and the main runway of the
airport has been upgraded. The airport will also have an air cargo terminal
designed to hold 400,000 tonnes per annum at maximum capacity.
At Sohar, another regional airport to the northwest of Muscat and mid-way
between the city and Dubai, a 500,000 passenger per annum terminal building
and a 13,190ft (4,020m) runway are planned. This airport will also have a 50,000
tonne capacity cargo terminal. In the south-eastern city of Ras Al Hadd, a new
airport with a passenger capacity of half a million and a single runway will be
constructed. Another regional airport being upgraded is Al Duqm, an industrial
oil town. A further regional airport development planned in the town of Adam has
initial plans for half a million passengers with a single 13,125ft (4,000m) runway,
likely as a military base. In a later stage of regional airport development, two
additional new airports are planned for Hayma and Shalim.
28
Oman Airports Management Company, Airport History- Muscat Airport,

https://www.omanairports.co.om/Page.aspx?MID=38&PGID=21
29
Oman Air, History, http://www.omanair.com/en/about-us/corporateinformation/history

30
Maslen, Richard New Airports and New Runways for Oman,

http://www.routesonline.com/news/29/breaking-news/244302/new-airports-andnew-runways-for-oman/
31
Ibid.
13
These airport developments mirror a similar capacity expansion programme

taking place at Oman Air, with 24 new aircraft to be delivered in phases by 2018,
32
taking Oman Airs fleet total to 50 aircraft. Upgrades to Omans air traffic
management systems have been ongoing in parallel to airport developments,
however this work must be completed, and system capabilities fully exploited,
before operational benefits can be realised. This report presents a model to
estimate the benefits of potential air traffic control improvements for Oman.
3.2
Products
The type of traffic considered in this model consists of passenger traffic. This is
because improvements to air traffic control in Oman would mostly benefit
passenger traffic. There may be some additional benefit to cargo, but that
benefit would be minute compared to the potential benefit for passenger traffic.
3.3
Model construction

looking at the economic welfare benefits of improvements to air traffic control in
Oman. This type of approach is favoured by economists who wish to understand
the net economic gains of an initiative to consumers, producers and the
economy as a whole.
Gains to air passengers from an improvement in air traffic control in Oman are
considered as consumer surplus, while gains to airports, airlines, and air
navigation service providers (ANSPs) constitute producer surplus. The sum of
producer and consumer surplus represents gains to Oman as a whole.
supply.
overflights flying over Omani airspace; and
with Omani aviation experts resulted in the conclusion that it is likely there would
32
http://www.omanair.com/en/about-us/press-releases/arrival-of-new-b737marks-launch-of-oman-air-fleet-expansion-programme
14
be an increase in the number of east/west overflights as a result of air traffic

improvements (thereby generating additional income for ANSPs). However there
is no agreement about the significance of such a factor and accordingly, we
have not quantified this factor in this report.
at 2025.
3.4
Model inputs

3.4.1
The most important input to the model is the average tactical delay per flight.
NATS supplied Oxford Economics with flight data for seven days in June 2015
for Oman from Flightstats (for Muscat airport). Total average delay was
calculated by looking at the difference between scheduled gate departure/arrival
33
time and actual gate departure/arrival time. The average flight delay in Oman
was approximately 27 minutes; however, not all of this delay is attributable to air
traffic control.
Given that publically available data on the precise causes of air traffic delays in
the Middle East and/or Oman doesnt exist, we used EUROCONTROL airport
ATFM delay data for 2008-2014, excluding the effects of weather (which are
much smaller in Oman) as a guide. Using this data, about 82 percent of total
delays can be attributed to air traffic control related issues. This cuts down the
delay minutes attributable to air traffic control from 27 minutes to about 22
minutes in 2015. For 2025, it was posited that delay minutes would double to
approximately 44 minutes, absent improvement in air traffic control.
3.4.2
passengers. As data does not exist for the Middle East or Oman, we used the
value of time for the UK, calculated using recent surveys done by the UKs
Airports Commission for business trips and EUROCONTROL value of time for
33

15
34
leisure trips. These values of time (VoT) were converted to USD at PPP
35
exchange rates. Two sets of values of time were used, one for business
passengers and one for leisure passengers, yielding a per minute USD 1.31 VoT
for business passengers and a per minute USD 0.48 VoT for leisure
passengers.
A weighted average VoT was calculated for Oman using a 12 percent business
passenger split and an 88 percent leisure passenger split. Note that Omani GDP
per capita is roughly the same as UK GDP per capita on a PPP basis, so no
country-specific VoT adjustment was required for business passengers.
However an adjustment factor of 1.11 was used to take into account the
difference in average GDP per capita on a PPP basis for Oman and the EU for
leisure trips. The split by purpose of travel was estimated using data on tourism
arrivals by purpose, produced by Oxford Economics.
The final weighted average figure for value of time was USD 0.62 per minute for
each passenger in Oman.
3.4.3
Proportion of local passengers

percent of passengers were Omani passengers. This is based on Oxford
Economics analysis from industry sources.
3.4.4
per minute were estimated as USD 40 based on the University of Westminster
36
3.4.5
Internal Oxford Economics forecasts for air passengers in Oman were converted
to Air Traffic Movements (ATMs) using an average of approximately 117
passengers per flight, an average calculated using the ratio of passengers to
34

Paper, (November 2014), 6. : Eurocontrol (2013) Standard Inputs for Eurocontrol
Cost Benefit Analysis
35

36

Cost Benefit Analyses, 6th ed. (September 2013), 11.
16
ATMs in the Middle East from the Airports Council International 2014 Preliminary
37
World Airport and Traffic Rankings.
3.4.6
Chart 3.1: Gross delay costs for airlines and passengers for Oman, 20152025
USD Million
120
100

airlines
passengers
80
60
40
20
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
3.4.7
Discount rate
3.5
38
Model results
in this model as additional flights were not modelled. Together, these benefits
represent combined consumer and producer surplus as a result of air traffic
control improvements in Oman. The consumer surplus (shaded in blue) of USD
244 million represents the total benefits that airline passengers would receive
over the 2015-2025 period. Likewise, the producer surplus (shaded in green) of
37

38

Analyses, 6th ed. (September 2013), 48.
17
USD 351.2 million corresponds to the total benefits airlines would receive over
the same period.
improved air traffic control. The net present value of these gross benefits sums
to USD 595 million for Oman for the period 2015-2025. In terms of the
distribution of benefits, 41 percent of this surplus would go to passengers and 59
percent to airlines.
Chart 3.2: Distribution of benefits between passengers and airlines in Oman
$, Million
S
$ 244.0 million
Consumer surplus
Producer surplus
41%
59%
$ 351.2 million
D
Quantity
18

Qatar
4.1
Aviation in Qatar
Civil aviation in Qatar began in the 1950s, with oil companies prospecting in the
southern part of the country. In order to serve these companies needs in
carrying personnel and equipment, the first runway was built in the western part
of Qatar, receiving one plane per month. As commercial air transport grew, the
first airport (on the current site of Doha International Airport) was built. As
Qatars economy developed, so did Qatars aviation sector. The national carrier,
Qatar Airways, was established in 1994. Qatar Airways fleet grew from 4
airplanes in 1997 to 152 airplanes serving 146 destinations and carrying over 22
39
million passengers. Furthermore, Qatar Airways has over 330 new airplanes
40
pending delivery over the next few years.
In 2001, the Qatar Civil Aviation Authority (QCAA) was established to promote
civil aviation and weather forecasts. Another milestone passed when Qatar
opened its new international report, Hamad International Airport, in 2014 with
phase 1 capacity of 30 million passengers per annum and a planned expansion
to 50 million passengers per annum. This new airport, designed to elevate Doha
as a key regional and global aviation hub, was also built to relieve congestion at
Doha International Airport as passenger and cargo air traffic increase on a
monthly basis.
The 2022 FIFA World Cup in Qatar will bring even more passenger growth to
Qatar, with Qatars market share of GCC aviation capacity predicted to increase
by 17.1 percent by 2023, more than three times the predicted capacity growth of
41
the GCC regions share of global aviation. This report presents a model to
estimate the benefits of potential air traffic control improvements for Qatar.
4.2
Products
The type of traffic considered in this model consists of passenger traffic. This is
because improvements to air traffic control in Qatar would mostly benefit
39
Qatar Airways, The Qatar Airways Story, April 2015,

http://www.qatarairways.com/iwov-resources/temp-docs/presskit/The%20Story%20of%20Qatar%20Airways%20-%20English.pdf
40
Ibid.
41
Qatar Civil Aviation Authority, Qatari aviation market to witness a huge leap in
10 years, http://www.caa.gov.qa/content/qatari-aviation-market-witness-hugeleap-10-years
19
passenger traffic. There may be some additional benefit to cargo, but that
benefit would be minute compared to the potential benefit for passenger traffic.
4.3
Model construction

looking at the economic welfare benefits of improvements to air traffic control in
Qatar. This type of approach is favoured by economists who wish to understand
the net economic gains of an initiative to consumers, producers and the
economy as a whole.
Gains to air passengers from an improvement in air traffic control in Qatar are
considered as consumer surplus, while gains to airports, airlines, and air
navigation service providers (ANSPs) constitute producer surplus. The sum of
producer and consumer surplus represents gains to Qatar as a whole.
supply.
overflights flying over Qatari airspace; and
flights (arrivals/departures/overflights) was included in the model. In terms of
overflights, Qatar lies under Bahraini airspace and does not manage any
overflights. Consequently, these were not modelled.
at 2025.
20
4.4
Model inputs

4.4.1
The most important input to the model is the average tactical delay per flight.
NATS supplied Oxford Economics with flight data for seven days in June 2015
for Qatar from Flightstats. Total average delay was calculated by looking at the
difference between scheduled gate departure/arrival time and actual gate
42
departure/arrival time. The average flight delay in Qatar was approximately 37
minutes; however, not all of this delay is attributable to air traffic control.
Given that publically available data on the precise causes of air traffic delays in
the Middle East and/or Qatar doesnt exist, we used EUROCONTROL airport
ATFM delay data for 2008-2014, excluding the effects of weather (which are
much smaller in Qatar) as a guide. Using this data, about 82 percent of total
delays can be attributed to air traffic control related issues. This cuts down the
delay minutes attributable to air traffic control from 37 minutes to about 30
minutes in 2015. For 2025, it was posited that delay minutes would double to
approximately 60 minutes, absent improvement in air traffic control.
4.4.2
passengers. As data does not exist for the Middle East or Qatar, we used the
value of time for the UK, calculated using recent surveys done by the UKs
Airports Commission for business trips and EUROCONTROL value of time for
43
leisure trips. These values of time (VoT) were converted to USD at Purchasing
44
Power Parity (PPP) exchange rates. Two sets of values of time were used, one
for business passengers and one for leisure passengers, yielding a per minute
USD 1.31 VoT for business passengers and a per minute USD 0.48 VoT for
leisure passengers.
A weighted average VoT was calculated for Qatar using an 18 percent business
passenger split and an 82 percent leisure passenger split as well as an
adjustment factor of 3.8 to take into account the difference in average GDP per
capita on a PPP basis for Qatar compared to the UK (for business trips) and
4.14 compared to the EU (for leisure trips). The split by purpose of travel was
estimated using data on tourism arrivals by purpose, produced by Oxford
42
43

Paper, (November 2014), 6 and Eurocontrol (2013) Standard Inputs for
Eurocontrol Cost Benefit Analysis
44

21
Economics. The final weighted average figure for value of time was USD 2.52
per minute for each passenger in Qatar.
4.4.3
Proportion of local passengers

percent of passengers were Qatari passengers. This is based on the rough
45
proportion of Qatari nationals relative to the total population.
4.4.4
per minute were estimated as USD 40 based on the University of Westminster
46
4.4.5
Internal Oxford Economics forecasts for air passengers in Qatar were converted
to Air Traffic Movements (ATMs) using an average of approximately 117
passengers per flight, an average calculated using the ratio of passengers to
ATMs in the Middle East from the Airports Council International 2014 Preliminary
47
World Airport and Traffic Rankings.
4.4.6
45
Gulf Research Centre (2014), Demography, Migration and Labour Market in

Qatar. Note that this is consistent with the scope of the research being citizens
of Qatar, with the focus being on benefits to those citizens. Some might argue all
business trips, of expatriate residents should also be included as these would
impact on Qatari productivity. However an equal case could be made that all
business trips by non-residents should also be included. Likewise, a case could
be made that all leisure trips should be included. A more consistent approach,
more in keeping with study scope, however, would be to restrict scope to Qatari
citizens.
46

Cost Benefit Analyses, 6th ed. (September 2013), 11.
47

passenger traffic - Mar 26, 2015," 2015.
22
Chart 4.1: Gross delay costs for airlines and passengers for Qatar, 20152025
USD Million
350
300
250

airlines
passengers
200
150
100
50
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
4.4.7
Discount rate
4.5
48
Model results
in this model as additional flights were not modelled. Together, these benefits
represent combined consumer and producer surplus as a result of air traffic
control improvements in Qatar. The consumer surplus (shaded in blue) of USD
921 million represents the total benefits that airline passengers would receive
over the 2015-2025 period. Likewise, the producer surplus (shaded in green) of
USD 614 million corresponds to the total benefits airlines would receive over the
same period.
improved air traffic control. The net present value of these gross benefits sums
to USD 1.5 billion for Qatar for the period 2015-2025. In terms of the distribution
of benefits, 60 percent of this surplus would go to passengers and 40 percent to
airlines. This is shown in the below chart.
48

Analyses, 6th ed. (September 2013), 48.
23
Chart 4.2: Distribution of benefits between passengers and airlines in Qatar

$, Million
$ 921.3 million
Consumer surplus
Producer surplus
60%
40%
$ 614.2 million
D
Quantity
24
OXFORD
NATS
Director,
Middle East
John Swift
Tel: 00 971 (0) 50 329 2732
john.swift@nats.aero
Head of Operations, Middle

East
Ben Kiff
Tel: 00 971 (0) 55 696 3173
ben.kiff@nats.aero
Country Manager, Qatar

Mark Wordley
Tel: 00 974 (0) 55 681921
mark.wordley@nats.aero
Abbey House, 121 St Aldates Oxford,

OX1 1HB, UK
LONDON
Broadwall House, 21 Broadwall
London, SE1 9PL, UK
Tel: +44 207 803 1400
BELFAST
Lagan House, Sackville Street
Lisburn, BT27 4AB, UK
Tel: +44 28 9266 0669
NEW YORK
5 Hanover Square, 19th Floor New
York, NY 10004, USA
Country Manager, Oman

Sajeesh Unnikrishnan
Tel: 00 968 (0) 9462 6024
Tel: +1 646 786 1879
sajeesh.uk@nats.aero
PHILADELPHIA
303 Lancaster Avenue, Suite 1b
Wayne PA 19087, USA
Tel: +1 610 995 9600
SINGAPORE
Singapore Land Tower, 37th Floor 50
Raffles Place, Singapore 048623
Tel: +65 6829 7198
PARIS
3 square Desaix
75015 Paris, France
Tel: + 33 178 91 5052
email:
mailbox@oxfordeconomics.com
http://www.oxfordeconomics.com/
25

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Economic benefits of

improvements to Middle East

A report for NATS

Purpose of this report ................................................................................. 3

Benefits of air traffic improvements to the Middle East ............... 8

Geography and products ............................................................................ 8

Benefits of air traffic improvements to Oman ............................. 13

Aviation in Oman ...................................................................................... 13

Benefits of air traffic improvements to Qatar .............................. 19

Aviation in Qatar ....................................................................................... 19

4.4.2 Passenger values of time................................................................. 21

an increase in the number of flights, either arrivals/departures and/or overflights.

Average tactical delay

Table 2: Model outputs

Net benefits sum ($,

ATC delay cost to airlines

Purpose of this report

Oxford Economics was commissioned by NATS to develop estimates of the

Trends in aviation in the Middle East

Airports Council International, "ACI World releases preliminary world airport

Joel Lewin, "Dubai replaces Heathrow as busiest airport", Financial Times, 12

% growth in passengers carried

In addition, the Middle East is investing heavily in tourism promotion, attracting

Oxford Economics, Tourism Decision Metrics Databank, accessed

Challenges for aviation in the Middle East

Structure of the report

The remainder of the report is structured as follows:

IATA, Support Gulf Success with Regional Cooperation and Global

Chapter 3 describes the benefits of air traffic improvements to Oman.

Chapter 4 describes the benefits of air traffic improvements to Qatar.

2 Benefits of air traffic improvements to

Geography and products

The model constructed for this analysis is based on an efficiency framework,

a decrease in average delay minutes for passenger flights arriving and

an increase in the number of flights, either arrivals/departures and/or

The key model inputs are described below.

Average tactical delay per flight

Arrival delays were calculated net of any departure delays.

Passenger values of time

Proportion of regional passengers

To estimate the consumer surplus for passengers, it was assumed that 50

Delay costs to airlines

Airports Commission, Economy: Delay Impacts Assessment Methodology

As UK inflation is close to zero for 2015, no adjustment was made to inflate

Oxford Economics (2011) Economic Benefits of Air Transportation Saudi

Air traffic movements

Distribution of increased delays through to 2025

ATC gross delay cost to

As per EUROCONTROL guidelines, a 4 percent discount rate was used.

University of Westminster (2013) European airlines delay cost reference

Airports Council International, "ACI World releases preliminary world airport

EUROCONTROL, Standard Inputs for EUROCONTROL Cost Benefit

3 Benefits of air traffic improvements to

Oman Airports Management Company, Airport History- Muscat Airport,

Oman Air, History, http://www.omanair.com/en/about-us/corporateinformation/history

Maslen, Richard New Airports and New Runways for Oman,

These airport developments mirror a similar capacity expansion programme

The model constructed for this analysis is based on an efficiency framework,

an increase in the number of flights, either arrivals/departures and/or overflights.

be an increase in the number of east/west overflights as a result of air traffic

The key model inputs are described below.

Average tactical delay per flight

Passenger values of time

Arrival delays were calculated net of any departure delays.