This spending is expected to further increase over the next five years as the $7.2 billion Dubai International Airport expansion gets underway, along with the construction of the $10bn Dubai World Central-Al Maktoum International Airport project that is scheduled to open on June 27.
While the UAE has emerged as one of the top investors in airport security, Qatar and Saudi Arabia are not far behind.
According to the Middle East Airport Security Market Assessment report, spending in this sector is estimated to reach $57.7m by 2015, with a compound annual growth rate of 7.5 per cent from 2008’s $34.7m.
“The UAE is actively spending in airport security with 2009’s tally accounting for $8.6m, or approximately 23 per cent of the total Middle East spending in the market,” Frost & Sullivan Research Associate, Aerospace and Defence Practice, Mirnalini Kumaran, told Emirates Business. “This spending is expected to rise due to the airport infrastructure development plans, like the Al Maktoum International.”
Rise in tourism
The growth is airport security in the Middle East has also been largely attributed to the increase in number of tourists thronging to the region. However, airports have also been upgrading their security systems to comply with the new government regulations and prepare for the escalating terrorist threats. “Most Middle East Airport upgrade projects are long-term projects, executed in short-term phases,” said Kumaran. “The market is expected to grow between six per cent and eight per cent in the next five to eight years.”
The study has estimated region accounts for 14.4 per cent of the Critical Infrastructure Protection Market.
Airport Security market consists of three main segments – screening, surveillance and access control markets. She said: “Screening, surveillance and access control equipment are used for airport security. The screening segment is estimated to have the largest share in the airport security market. Many new technologies such as IP-based surveillance and biometrics identification are widely used in this region. Integration and interoperability of security systems at different operational areas are considered to be the key challenges.”
However, some airports are reluctant to spend on security systems due to tighter budgets, complex procurement patterns and inconsistent security policies, causing a dip in security solution vendors’ revenues.
The report also adds that intensifying competition has constricted the margins of market participants. They can offset these issues and command premium prices through value-added services, product differentiation and innovation.
“Market participants should start providing new technology equipment and integrated solutions and adopt efficient supply chain and competitive strategies,” she said. “Technological innovations also have a significant role to play in the adoption rates and advances in biometric identification and surveillance bode well for the market.” The heavy investment in security at Dubai Airports runs parallel with the increasing traffic volumes. According to the latest figures, Dubai airport recorded a 20.4 per cent growth in passenger traffic and 26.4 per cent in cargo volumes at the end of Q1 2010, compared to the same period last year.
Paul Griffiths, CEO, Dubai Airports, said at the time: “The pace of the growth we’re seeing is frenetic thanks to capacity increases, gradually improving economic conditions and rising consumer confidence. Although the recent operational disruptions due to European airspace closures because of the ash cloud will have an impact on April’s traffic results, the strong surge in traffic created as airlines clear backlogs will go a long way in making up the difference.”
Earlier, Griffiths also had said Dubai airports will account for 50 per cent of the total capacity of 400 million passengers across airports in the Middle East over the coming years.
“The Middle East is forging ahead, and within the next few years the collective capacity of airports in the region will reach 400 million passengers, with Dubai constituting 50 per cent of the total,” he said.
He added that while global aviation growth rates have slowed to less than two per cent, the Middle East is clocking minimal growth rates of seven per cent.
“Dubai is surpassing both the world and the region, with growth rates between nine per cent and 19 per cent,” he said.
Dubai International is already poised for an aggressive expansion, as Griffiths said: “In the long term, we expect to crack the 100-million passenger mark before the end of the next decade so investment in the infrastructure to support this growth will continue. This includes plans for building Concourse 3 the world’s first dedicated A380 facility and Dubai World Central-Al Maktoum International.”
But Dubai isn’t alone in its progress. Last year, the International Civil Aviation Organisation (ICAO) revealed total passenger traffic fell in all regions except the Middle East, which posted 10 per cent growth.
All other regions recorded negative growth, with Africa hardest hit at minus 9.6 per cent overall. And through it all, investments into Middle East airports expansion have forged ahead. According to a study by Frost and Sullivan earlier, this market will draw $86bn to fuel its growth. And this is estimated to double after 2025, with major airports in the region turning into global hubs.
The Frost and Sullivan report attributes this emerging dominance to the A380 order backlog of 50 per cent of global deliveries, which, it states, will drive the aviation industry as a whole in the Middle East.
“The emergence of the Middle East as a global hub in the future is attributed to the expansion of the 12 major airports across the region that constitute more than 90 per cent of the total investment of $86bn in the region,” said Frost and Sullivan Research Analyst Gautam Ratan Kanal earlier. “The economic slowdown will not impact the region’s commercial aviation industry, and airport development activities will persist despite the slowdown as most expansion activities are funded by governments here.”
Not to be overlooked in this infrastructure spending is the investment in IT systems across the region, which is estimated to see an investment of $25 billion over the next five years,
an industry expert from air transport communications and IT specialist, Sita, said earlier.
Investments in IT
The company also announced it had earned six per cent of its total revenue in 2009 from the Middle East alone.
The region has emerged as a prime market for IT infrastructure investment, especially in airport and government sectors, according to a Sita executive. Switzerland-based Sita reported consolidated revenue of $1.47bn for 2008 – up 3.5 per cent compared with the previous year’s $1.42bn.
Hani El Assaad, Sita’s Regional Vice-President, Middle East and Turkey said earlier: “In January, Sita signed a five-year, $76m contract to implement and maintain advanced communications and desktop infrastructure for Saudi Arabian airline globally.
The hybrid network solution will facilitate the introduction of a broad range of applications, including a new passenger management system, according to Sita.
Assad also said: “Oman Aviation Services, the parent company of Oman Air, will invest $4.2m over four years in information technology improvement at Muscat International Airport.”
Following that, Sita signed a $3.2m deal with Bahrain’s Civil Aviation Affairs (BCAA) to deliver air/ground data link systems aimed at enhancing air traffic safety at Manama International Airport and in airspace under its control; andanother similar five-year deal with the Sharjah-based Air Arabia in March.
Assad added: “The driver for the investment is cost reduction.”