UAE aviation country report

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By Robeel Haq www.arabianbusiness.com

Heralded as the aviation capital of the Middle East, the United Arab Emirates has invested billions of dollars to emerge as a global industry powerhouse.

The continued success of the United Arab Emirates aviation industry has placed a global spotlight on the country in the recent years, with brands such as Emirates, Etihad, Air Arabia and Dubai International Airport now considered household names. However, while these achievements have become more apparent in the past decade, the decision to invest and develop the aviation industry to fuel economic growth in the country was taken many, many years earlier.

“The current success of aerospace activities within the United Arab Emirates is a result of undeniable foresight from the country’s leaders, who indentified the importance of air transport in their plans to create a modernised global country,” explains Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organisation (AACO). “It was due to this foresight that we have witnessed a mass investment into airlines and airports in each emirate, together with the type of generous open sky policies that were destined to bolster the speed of development and enhance the UAE’s accessibility from anywhere in the world.”

The recent opening of Al Maktoum International Airport in the Dubai World Central complex is evidence enough that even a global recession has not stopped the country from pursuing its mass investment in aerospace infrastructure. While others around the world have tightened their purse strings, the UAE has pushed ahead at full speed, and the results have shown that the strategy is paying rich dividends. Whether it’s the record profit levels announced by Emirates this year, the fact that Etihad is expected to break even for the first time in 2011, or double-digit increases in passenger and cargo volumes at Dubai and Abu Dhabi Airport, there seems to be no stopping the UAE.

According to Teffaha, a number of factors have contributed to the UAE’s status as a global aviation hub, starting with the famous adage of ‘location, location, location’, with the country sitting in the middle of a priceless crossroad between the east and west, north and south. Recent investments in infrastructure have also been pivotal, together with the introduction of super long-haul aircraft into airline fleets with the ability to connect any two points in the world with a maximum of one stop, supported by the aforementioned open sky agreements.

Other factors include the ‘customer centric’ business models used by locally-based airlines, together with the world-class incentives to establish a business and operate in the country, and finally the country’s (and particularly Dubai’s) emergence as a global financial centre, competing with Hong Kong, Singapore, London and New York.

While these factors have helped to shield the UAE from the impact of the global recession to a large extent, especially in comparison to developed markets in Europe and the United States, the situation did cause a blow to the speed of development. In 2009, the UAE aviation market grew by 1.9% over 2008 in terms of RPKs, mainly attributed to the exceptional performance of AACO members (EK, EY and G9) in the UAE, which collectively grew by 17.1%. However, even with increased traffic, revenues suffered from the lower consumer confidence and purchasing power, decreasing in the UAE market by 15.3%.

“The impact of the financial crisis on the UAE as a whole was one of the most severe in the Arab world, as foreign capital exited and the tourism sector plunged down,” continues Teffaha. “The challenge at this stage is making sure there is a healthy and stable economic platform to boost domestic demand, which will lead to a fast-paced recovery from the global downturn and support further growth in aviation. Of course, the country has always provided its aviation industry with all the support needed for continuous growth and there’s no reason to doubt this will continue for many, many years to come.”

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