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June 25, 2010

Dubai’s ambitions soar with new airport

Filed under: Airports — aerotowfeeq @ 7:08 pm
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DUBAI, United Arab Emirates — In the desert beyond the skeletons of villas unfinished because of Dubai’s economic slump, the home of the tallest building is preparing to open what could become another record-setter: an airport aiming to become the world’s busiest.

Civic boosters envision Dubai World Central-Al Maktoum International, set to open Sunday, as one day growing into a mammoth transit hub of five parallel runways that could trump Atlanta’s airport for the No. 1 spot. Where camels now graze, they see up to four terminals handling more travelers than the world’s No. 2 and 3 airports — Chicago’s O’Hare and London’s Heathrow — combined.

Big ambitions die hard here. Yet the airport and surrounding development — with a projected price tag of more than $32 billion — are a gamble for a city-state whose soaring aspirations have been eclipsed by its struggle to pay for them.

Dubai has proved skeptics wrong before, growing its current airport from a lowly wind-swept airstrip into one of the world’s busiest international transit hubs in a few decades. What is unclear now is whether the sheikdom — one of seven city-states that make up the United Arab Emirates — can attract enough business to justify its appetite for a project of this scale.

“The name of this game is to be able to interconnect traffic from a wide range of regions and commercial centers,” said Mike Boyd, an aviation industry consultant. “It’s an open question if Dubai is going to be competitive” with other emerging global air hubs, he said.

The new airport, which will grow in stages over the next two decades, was planned well before the economic meltdown revealed serious problems with Dubai’s finances. The emirate is still wrestling with more than $100 billion of debt. It has yet to finalize a deal to repay lenders stung by credit problems at its government-owned Dubai World conglomerate. Concerns are also mounting at other state-linked companies.

Much of the debt piled up because of megaprojects that, like the new airport, promised to be the biggest or the best — one-of-a-kind feats designed to make Dubai stand out on the global stage and bring in cash.

But as the credit crunch deepened, Dubai’s vast network of state-owned companies suddenly found themselves scrambling to pay the bills, spooking global markets with their debt load and inability to pay.

That hasn’t derailed the airport plans, even if Dubai’s debts remain a key concern for bankers and bondholders.

Officials say it remains a vital piece of infrastructure that will ensure the emirate retains its crown as the region’s transportation and logistics hub. Dubai is already home to the region’s busiest sea port and airport.

“There’s no suggestion of scaling back,” Dubai Airports CEO Paul Griffiths said in an interview this week. “The world can now sit back and see that Dubai is really taking the lead in this sector.”

Although Dubai’s existing airport is among the world’s busiest, it operates below capacity. Griffiths argues the new airport is nonetheless needed because the existing one is being bogged down at peak times. That’s why construction cranes are hard at work building an additional concourse at the existing airport, Dubai International, even as increased attention falls on the new Al Maktoum International, named for Dubai’s ruling family.

“The strategy is to run ahead of time … rather than wait until things become more constrained,” said John Strickland, a consultant who follows the aviation industry. “It’s just good fortune they’re able to do this. Others will be very envious.”

Ultimately, the new airport is designed to handle up to 160 million passengers and 12 million tons of freight each year. Assuming it can drum up enough business, it would eclipse Hartsfield-Jackson Atlanta International Airport, the world’s busiest passenger airport.

Atlanta handled just over 90 million passengers in 2008, according to the most recent annual statistics from the Airports Council International trade group. That’s well over double the 37.4 million passengers that passed through the tax-free shopping corridors of Dubai International that year.

Dubai International is growing fast, however. Preliminary figures show passenger numbers shot up 9 percent to 40.9 million in 2009.

Driving much of the traffic is rapidly growing Emirates airline, a state-owned carrier that has emerged profitable and relatively unscathed from Dubai’s debt crisis.

It shows no signs of slowing down. Just weeks after Emirates unveiled a whopping $11.5 billion order for 32 more Airbus A380 planes, on top of the 58 it had previously requested, it confirmed plans to order more planes at next month’s Farnborough International Airshow. Its recruiters are busy searching for 3,000 new cabin crew and more than 700 pilots as part of the company’s growth plan.

The idea is to eventually shift Emirates’ operations, and possibly the rest of Dubai International’s, to the new airport sometime next decade. For now, Emirates is staying mostly put at its existing base — a strategy analysts say makes sense because it is more efficient.

That leaves Al Maktoum International looking elsewhere for customers. Griffiths, the former boss of London’s Gatwick airport, acknowledges it will be years before his new airport really takes off.

Only one runway has been built — part of the $820 million investment Dubai’s airport company estimates has been made in the new airport so far. The total project, including vast business and residential complexes nearby, is expected to cost over $32 billion.

Initially, it will only handle cargo flights, like the Emirates airline Boeing 777 freighter that landed on a test flight last Sunday. The first passenger terminal isn’t slated to open until March.

Ten airlines have signed up to operate at the new airport, Griffiths said. But days before the debut, he was unwilling to name one that would be flying there when the doors open Sunday.

“We’re not expecting it to be a massive runaway success,” he said. “To create such a large facility is going to take some time. … It’s by nature a fairly long-term ambition.”


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