This action might not be possible to undo. Are you sure you want to continue?
The Centre does not accept any legal responsibility for consequences that may arise from errors. Liz Thomson & Jennifer Tian © February 2009 Centre for Asia Pacific Aviation No part of this publication may be reproduced.com www. Lebanon. This publication is not a substitute for specific professional advice on commercial or other matters.MIDDLE EAST AVIATION OUTLOOK 2009 Published by Level 4. Iran. economic. Qatar. cultural. Syria. 88 Phillip St Sydney NSW 2000. Australia Tel: + 61 . social and other considerations. Their common features include their geography. For the purposes of this aviation study. Oman. Jordan Kuwait. Disclaimer: Centre for Asia Pacific Aviation has made every effort to ensure the accuracy of the information contained in this publication. for the purposes of this report. is their combined potential to effect change in global aviation markets through applying new aviation norms. reflecting geographical.(02) 9241 3400 publications@centreforaviation. by the internal links between them and eg moves towards a common aviation market. Note: There are many definitions of what constitutes the ‘Middle East’. we have included the following countries in our analysis: Bahrain. Aurora Place. or transmitted in any form without the prior written permission of Centre for Asia Pacific Aviation. More importantly. United Arab Emirates and Yemen. .com Contributions by: Peter Harbison.centreforaviation. but they are also defined by a similar aviation-philosophical trend.(02) 9241 3200 Fax: + 61 . Saudi Arabia. Simon Elsegood. Neha Mathur. omissions or any opinions given. Egypt. Derek Sadubin.
100 Saudi Arabia Even in a region that has been averse to change. Saudi Arabia Locator Source: Centre for Asia Pacific Aviation Saudi Arabia – Population and Economy: 2008 Population Nationals (‘000) Non-citizens (‘000) Total (‘000) Growth Rate Demographics 0-14 yrs 15-64 yrs 64+ yrs Median Age Urbanisation GDP USD (billions) Per capita (USD) Growth 22. unprecedented commitment to the process of reform. however.576 28. In the very recent past.5% 2.5% Source: Centre for Asia Pacific Aviation. the Government has shown a strong.570 5.5 95% 546. As the Government begins moving forward with the longdelayed unbundling and privatisation of the flag carrier.0% 59.146 1. CIA Fact Book & UN Note: GDP measured in Purchase Power Parity terms Middle East Aviation Outlook . Saudi Arabia’s national aviation sector has long lagged the field.0 19. the Kingdom’s aviation sector has positioned itself to experience a near-total renaissance. the licensing of two new domestic LCC competitors and possibly the corporatisation of the airports.4% 21.9% 38.800 3.
officially awarding two foreign companies a total of USD154.101 Saudi Airports – building fresh capacity and drifting toward privatisation General Authority of Civil Aviation (GACA) took a key step forward in realising its long term goals of reforming Saudi Arabia’s aviation sector. Saudi Arabia total passenger traffic (domestic & international): 1997 to 2007 Source: Centre for Asia Pacific Aviation & General Authority of Civil Aviation Mr Al-Ruhaimy stated he would next like to see the privatisation of the country’s airports. both domestic and international. The contracts are also part of the government’s broader plans to transform the airport sector. arguing it will fulfil his vision of establishing Saudi Arabia as an aviation hub in the region. “of course.4% thanks to the arrival of new entrants Sama and nas air.8 million in management contracts for its three busiest airports in late 2008. averaging just 3. Saudi Arabian traffic growth has been sluggish in recent years. although domestic traffic rose 5% in 2007 and international increased 8. GACA president. However. compatible with our national interest and this means that we will face increasing challenges from competing airlines and airports. we cannot expect the airports and airlines to move from their current position to the full force of global competition overnight. Germany’s Fraport was awarded two contracts for the commercial management of Riyadh King Khaled International Airport and Jeddah King Abdulaziz International Airport while Singapore-based Changi Airports International (CAI) was awarded a USD42 million management contract for Dammam King Fahd International Airport (KFIA). Abdullah M Al-Ruhaimy. Bringing Fraport and Changi to support our international airports is a key element of this strategy". and is likely to face opposition from companies used to their “protected lifestyle”. He stated. We have planned to gradually open up and liberalise the sector so that they can adapt themselves during the course of time”. He stated. confirmed all three contracts are for six years during which the companies will invest their technical knowledge to develop the existing facilities and qualities of services. Middle East Aviation Outlook . Mr Al-Ruhaimy recognises the path to privatisation is likely to be a lengthy and challenging process. offering improved airport services and generating more passenger traffic to the country. “GACA's policy is to move toward the most liberal aviation position with countries around the world.4% over the last decade. opening it to investment and enhancing its attractiveness to tourists.
Jeddah launches expansion programme in Dec-08 Fraport is steering Jeddah King Abdulaziz International Airport’s (KAIA) aggressive USD4. Egypt’s Ministry of Civil Aviation signed a contract late in 2004. Clearly. a massive increase from the current capacity of 15 million passengers p/a. Fraport is building up sought-after expertise at this level of foreign airport management. Fraport stated it had already positioned employees at the airports. On that occasion. expansion of the existing South Terminal facility and a new concourse with 25 gates. There is no investment requirement included in the contract. improving service quality. Details of the airport Master Plans includes the construction of two new terminals. Fraport beat off competing bids from Spain’s AENA and Aeroport de Nice/Sufavria. As Frankfurt International Airport’s own Airport City is a highly regarded example of its kind globally. Fraport may be positioning itself early and well to benefit from such opportunities in the Middle East. Jeddah King Abdulaziz International Airport traffic: 1997 to 2007 18 Millions 15 12 9 6 3 0 1997 1998 1999 2000 2001 Hajj 2002 Domestic 2003 2004 2005 2006 2007 International Source: Centre for Asia Pacific Aviation & General Authority of Civil Aviation Middle East Aviation Outlook . with the specifications much the same as the one pertaining to the Fraport management contract in Egypt (Cairo). and achieving sustainable traffic growth. with plans to focus on developing the airports’ infrastructure.8 billion expansion programme. after a year of negotiation.102 Fraport officially awarded management contracts Riyadh and Jeddah airport Fraport will take on the task of managing and operating two of Saudi Arabia’s largest airports at Riyadh King Khaled International Airport and Jeddah King Abdulaziz International Airport. The German company earlier stated it plans to conduct an ongoing extensive training programme for all levels of management at both airports. which will increase capacity to eventually handle 80 million passengers p/a. with Fraport to operate Cairo International Airport for eight years. recently also expanding its presence with projects in China and India.
This is the first time a foreign airport operator has been Middle East Aviation Outlook . He stated. In Jul-08. with current capacity to handle 11 million passengers p/a.103 Jeddah King Abdulaziz International Airport capacity breakdown by carrier: Week commencing 19-Jan-09 Pakistan 3. • ATC tower.000 space car parking facility. • Aircraft loading area with capacity to handle three million tons p/a. In 2007.1% Source: Centre for Asia Pacific Aviation & OAG One of the terminal facilities planned was scheduled to commence construction on 29-Dec-08.4 million passengers. with details including: • 42 departure gates with 74 connecting gangways. Sama and nas air.0% Gulf Air 1. described the contract as a “land mark deal”. strengthening the company’s strategic presence in the Middle East. • Aircraft hangars. Dammam King Fahd International Airport CAI awarded “land mark” contract Dammam Airport is positioned as the gateway to the Eastern province of the country. The Dammam management contract marks the largest project CAI has ever won. the GACA awarded Aeroports de Paris a EUR137 million contract to design new facilities for the airport. a railway station and a car park. Saudi LCCs. and is currently growing at an average annual rate of 5% p/a. the airport handled 4. Additional contracts for the airport development will be signed on a “priority basis”.9% Egyptair 2. The airport’s development is being fast tracked to accommodate the increasing levels traffic witnessed in the last 12 months under the GACA’s aviation liberalisation programme.8% Other 21. Dammam King Fahd International Airport (KFIA) is Saudi Arabia’s third largest airport. have handled more than 2 million domestic and international passengers between them since they launched services in late 1Q07. • 25. including a new terminal. Wong Woon Liong. aircraft parking areas and new tarmacs. CAI CEO. and its second success in the Middle East following its “master planning” contract at Jordan’s Aqaba King Hussein International Airport.2% Air India 2.0% Saudi Arabian 69. with aims to increase capacity to 16 million under Phase II of the airport’s expansion programme (further details not disclosed). representing 9% of the country’s total traffic. “we are indeed privileged to be given this opportunity to help transform KFIA into a commercially and service oriented premier international airport.
4% Klm 4.9% Air India 5.0% 2001 2002 2003 PAX 2004 2005 2006 PAX growth 2007 4.0% -4.3% Source: Centre for Asia Pacific Aviation & OAG Middle East Aviation Outlook .5 Million PAX 16.0% 2. passenger and cargo terminal operations.0 3.0% 10. subject to approval.6% Other 21.0% 6. Dammam International Airport capacity breakdown by carrier: Week commencing 19-Jan-09 Etihad 6.0% 12. Dammam International Airport passenger numbers and passenger numbers growth: 2001-2007 4.104 tasked to manage KFIA. in line with the Saudi Arabian government’s decision to give the state-owned civil aviation sector greater autonomy”. CAI is also currently in the process of acquiring a 29% stake in China's Nanjing Lukou Airport.0% 0. The Singapore-based company was selected to improve airport operations and boost passenger traffic and commercial revenue.0% 4. commercial and airport network developments and staff training.5 Source: Centre for Asia Pacific Aviation and Changi Airports International Changi Airports International (CAI) is a wholly-owned subsidiary of the Civil Aviation Authority of Singapore (CAAS).5 3.0 2. Under the terms of the contract. a team from CAI will be based in Dammam to assist in the management and development of the airport.2% Saudi Arabian 56.0% -2.6% Gulf Air 5. which operates and manages Singapore Changi Airport.0% 8. and will be responsible for areas including.0% 14.
medium and small aircraft and a mosque. new 87 m air control tower. a second runway.000 sqm passenger terminal. parking areas for 27 large.4% average annual increase over the last decade. Plans for its expansion arise from the growing number of pilgrims visiting Medina each year. parking areas for another ten aircraft and an area for Pilgrims. This phase includes the construction of a new 256.105 GACA to open bids for Medina Airport In Dec-08. The second phase. This phase includes the construction of an additional 172. The third phase.4 million passengers p/a. new runways. both domestic and international.000 sqm passenger terminal. Saudi Arabian international traffic growth rose 8. will increase capacity to 30 million passengers p/a. The current runway will also be expanded in this phase.4% in 2007. as well as the preparation of a general expansion plan. parking area for 13 aircraft and new runways.000 sqm passenger terminal. 14 aerobridges. Saudi Arabia passenger traffic growth: 1998 to 2007 9. opening it to investment and enhancing its attractiveness to tourists. 10 aerobridges.0% -3. Medina. the General Authority of Civil Aviation (GACA) announced plans to invite bids for the new Muhammad bin Abdulaziz International Airport project.0% 1998 1999 2000 Total growth 2001 2002 2003 2004 2005 2006 2007 Domestic growth International Growt Source: Centre for Asia Pacific Aviation & General Authority of Civil Aviation Middle East Aviation Outlook .0% 3. covering three stages. The airport was transformed to an international airport in Jun-06.0% 6. under a Build-Operate-Transfer (BOT) contract. to be carried out from 2019 to 2029. The project involves the construction of terminals and the development of runways. The first phase is scheduled for completion in 2019 and aims to increase the airport’s capacity to 12 million passengers p/a. security wall. to be carried out from 2029 to 2039. GACA hopes the development will reduce the pressure on Jeddah King Abdulaziz International Airport (KAIA). well up on the 3. The development is also part of the Saudi Arabian Government’s plans to transform the airport sector. new airport road. will increase capacity to 18.0% 0. four aerobridges. This final phase includes the construction of another 84.
Under the privatisation plans. SAA sold 49% of its profitable catering unit. SAA will act as a holding company. which was to have seen a phased. and then finally confirmed in Sep-08. Chief among these is the world economic situation. Several factors now look to favour a later rather than earlier privatisation. SAA plans to privatise the 30-40% of the remaining four units. five to six year programme. long-term profitability and attract investment. The announcement was a radical break with the previous privatisation guideline. may be a driving force delaying the privatisation. Strategic partners will also be offered shareholdings in the new companies. SAA’s traffic performance has been lacklustre over the past few years. followed by the Prince Sultan Aviation Academy.106 Saudi Arabian Airlines – preparing to adapt After successfully conducting the partial privatisation of its catering unit in 2007. technical and civil aviation services and an aviation academy. has reassured staff that the future of the airline is “extremely promising” and that the privatisation process. Saudi Arabian Profile Founded Bases Destinations Profitable? Listed? Owners Website Online bookings? 1945 Jeddah 76 No No Govt of Saudi Arabia – 100% www. now almost halfway passed. Privatisation plan slowed by the need for turnaround? In Jan-08. is looking increasingly unlikely. Following that. although no timeframe has yet been given. the scope of the required turnaround at Saudi Arabian. But. originally scheduled to be completed before the end of 2007. currently in its eighth year. SAA has “many other plans in the pipeline” at the moment. was delayed until a winning bid was selected in Jan-08. It has now been more than 12 months since SAA received final approval from the Saudi Government to convert its strategic units into six separate and wholly-owned companies. necessary if the carrier is to ensure consistent. the partial sale of the cargo unit. Mr Almolhem announced that the carrier could undergo privatisation of its core passenger business within the next 18-24 months. is “proceeding smoothly”. and the ambitious nature of the redevelopment and restructuring plans that the carrier has unveiled. including catering. In Sep-07. (although it had already approached the market for bids more than 12 months earlier). SAA’s turnaround ambitions. ground services. However the carrier and reportedly the Saudi Government have been slow to act on the plans after an initial flurry of activity. with the ground handling and the MRO unit next up for tender. with subsidiaries running its operational units. Middle East Aviation Outlook . the scarcity of credit has not been helped by the slow pace of the sell off of SAA’s business unit. cargo.saudiairlines. it is moving with anything but haste. ahead of domestic IPOs for the units. The two-year timeframe. The point to be made is that perhaps it has too many to allow it to successfully concentrate on the privatisation process.com Yes While the privatisation may be proceeding smoothly. The technical and civil aviation services business will be the last to on the privatisation schedule. as a prelude to full privatisation of its mainline passenger operations. To quote the Director General. Khalid Bin Abdullah Almolhem. planned within two to three years of their sale. and 2008 may be even worse. Saudi Arabian Airlines (SAA) Director General.
suitable for domestic and regional operations. from its fleet. including the politically charged issues of women and foreign nationals at the carrier.4% North America 0. after the government ended its domestic monopoly. Middle East Aviation Outlook . This aims to address all aspects of its operations. Saudi Arabian Airlines capacity share by region: Week commencing 12-Jan-09 India Subcontinent 7.107 Saudi Arabian Airlines passenger traffic (mill): 2002 to 2007 Source: Centre for Asia Pacific Aviation & airline reports The carrier slashed its domestic operations by 50% (where it was reportedly losing approximately USD480 million per year). to its IT and service infrastructure to staff culture and work practices. the vast majority of orders are for A320 aircraft. for both narrowbody and widebody aircraft. handing them over to new domestic LCCs. It has placed several large aircraft orders in the past 18 months.2% Source: Centre for Asia Pacific Aviation and OAG Ten year modernisation plan progressing At the same time as its domestic monopoly was ending in early 2007. Saudi Arabian Airlines embarked a ten-year modernisation plan.0% Europe 2.0% Africa 4. and now has orders and options for more than 70 aircraft.2% Middle East 86.3% Asia Pacific 0. nas air and Sama. Tellingly.
But it does appear to see a future in short-medium haul services as Middle East liberalisation spreads. Middle East Aviation Outlook .108 Saudi Arabian Airlines current fleet and orders: Jan-09 In On Manufacturer Type Service Order Storage Airbus A300 A320 A321 A330 747 757 777 787 737 (JT8D) MD-11 MD-90 Falcon 7X Falcon 900 170 Gulfstream II Gulfstream III Gulfstream IV Hawker 4000 125 6 45 4 8 28 6 23 4 2 4 29 4 2 15 1 2 6 2 63 1 Total 6 45 4 8 29 6 23 4 2 4 29 4 2 15 1 2 6 2 192 Boeing Boeing (McDonnellDouglas) Dassault Aviation Embraer Gulfstream Aerospace Hawker Beechcraft Total 4 Source: Centre for Asia Pacific Aviation and Ascend Saudi Arabian clearly – and sensibly – has no plans to be a global network airline.
The new aircraft will increase the carrier’s seating capacity by approximately 40%. nas air current fleet and orders: Jan-09 Manufacturer Type In Service Airbus Boeing Embraer Total Source: Centre for Asia Pacific Aviation and Ascend On Order 20 Total 20 4 1 13 2 40 A319 A320 737 (NG) 190 195 4 1 4 2 11 9 29 Middle East Aviation Outlook . Twelve new destinations. nas air has three new A320s scheduled for delivery between Feb-09 and May-09. including substituting smaller aircraft on lower-demand routes and frequencies reduction or suspensions on more marginal routes. and allow it to reinforce its network with additional frequencies on high demand international routes. CEO.flynas. India. The carrier launched its second route to Lebanon with Riyadh-Beirut service on 01-Nov-08. growth may be impacted by the economic slowdown. Syria and Pakistan.com Yes Despite the drop in demand witnessed in the region recently. are expected to be launched over the next two years. recently stated that with current market conditions the carrier may have to make “some adjustments” to its ambitious expansion plans. Sudan. Jordan.109 nas air – Saudi Arabia’s first LCC nas Air Profile Founded Bases Destinations Profitable? Listed? Owners Website Online bookings? 2007 Riyadh 5 No No National Air Services – 100% www. Walter Prenzler. However. including Abu Dhabi and cities in Egypt. nas air has confirmed that it is developing measures to deal with the downturn.
none of Sama’s considerable accomplishments would have been possible. which was further exacerbated as its main competition.5 million guests carried to date and with an international route network spanning the Middle East. also co-founder of the airline. opening up domestic operations to new entrants. now I believe is the right time to hand over the day to day leadership of Sama. Source: Company Statement. even as inflation in the country’s booming oil economy has accelerated over the past eight years. former CEO and co-founder. and is expected to peak above 6. Fuel costs: Sama felt the effect of the fuel spike in 1H08. The carrier at the end of 2007. stated it expected to operate a fleet of 16 aircraft by the end of 2008 and the 35 aircraft by 2010. Saudi Arabian’s discount on fuel “represents [a] five times cost difference”. Sama was one of the first LCCs spawned in Saudi Arabia. after nearly four years leading the start-up and initial growth phase of Sama. when the Kingdom removed Saudi Arabian Airlines’ monopoly.com Yes Sama current fleet and orders: Jan-09 Manufacturer Type In Service BAE SYSTEMS Boeing Total Jetstream 41 737 (CFMI) 1 7 8 Total 1 7 8 Source: Centre for Asia Pacific Aviation and Ascend The company. According to Sama. it stated it was considering withdrawing from Saudi domestic operations altogether unless “the [domestic] situation improves and a reasonable return can be made”. succeeding Andrew Cowen. Sama was reportedly struggling to pay its employees on time. Sama’s new CEO. Middle East Aviation Outlook . which the carrier purchases at market rates. Mr Cowen’s departure comes as Sama faces a challenging operating environment. joined the LCC on 01-Dec-08. To resolve the problem. The fare cap has not been raised since its implementation at the beginning of the decade. although has refused to accelerate the pace of the review. I extend my best wishes to Bruce who takes on a great Sama team without which. which has negatively impacted the Saudi economy. Middle East traffic decline. Saudi Arabian Airlines. as a result of the notable reductions in oil prices over the past four months. Sama: “With Sama having achieved profitability in August and September of this year. b) c) d) e) There is clearly potential for expansion of the Saudi Arabian domestic market. with 1. the GACA implemented a review of the fare cap in 2008.5% in 2008. Bruce Ashby. Mr Ashby was previously President and CEO of IndiGo Airlines for three years through its launch and initial growth phase. conducted its maiden flight on 18-Mar-07. characterised by the following pressures: a) Government-mandated domestic fare cap: Ultimately prevents domestic carriers from passing on increasing fuel costs to passengers. 26-Nov-08. But the national regulatory and competitive structure is still unwieldy. As a result. Fuel supplier payment deadlines: Fuel suppliers have requested early payment of their contracts. received a fuel subsidy.flysama. Mr Cowen’s contract expired in Dec-08.” Andrew Cowen. founded by Prince Bandar bin Khalid al Faisal in 2005. in mid-Nov-08. and probably constrains growth.110 Sama – the Middle East’s newest LCC Sama Profile Founded Bases Destinations Profitable? Listed? Owners Website Online bookings? 2007 Dammam 5 No No Investment Enterprises Ltd – 100% www. Intense competition in liberalised market: Sama has also been vocal in complaining about the state of competition in the newly liberalised Saudi aviation market. Sama had planned to operate a fleet of 25 to 30 aircraft by 2010. In Sep-08. something Sama is unable to compete with.
This action might not be possible to undo. Are you sure you want to continue?