Dubai, Doha and Abu Dhabi are locked in a multi-billion dollar race to build the biggest, swankiest airport in the Middle East. They are hoping to leverage their location—all three cities are around six hours from two-third’s of the world’s population—to build global travel hubs that boost revenues for their national carriers, tourism and real estate developments.
The Dubai international airport is the cornerstone of the emirate’s efforts to build a travel, tourism and retail hub. After handling just 18 million passengers in 2003, the airport attended to 57 million fliers in 2012. This year, it surpassed Paris’s Charles de Gaulle airport as the second busiest airport in the world, and is slated to overtake London’s Heathrow Airport in 2015 as the airport with the most international traffic. The airport’s success helped spawn a retail and hospitality industry centered around it and turned Dubai-based Emirates Airlines into the world’s third biggest airline. Government-owned Dubai Duty Free, which operates stores in the airport, is expected to rake in $1.8 billion in revenues this year. Rents in a logistics and business zone surrounding the airport are at a 60% premium to other industrial districts in the region.
The success has made Dubai more ambitious. The airport has embarked on a $7.8 billion expansion program to boost capacity from the current 60 million to 90 million passengers per year by 2018. The prize that Dubai is eyeing is not just the bragging rights for having the most popular airport in the world. The airport is expected to generate around 22% of the total employment and 32% of the emirate’s GDP by 2020, according to the Dubai Airport Strategic Plan 2020 (pdf) of the civil aviation authority.
Dubai’s rivals are anxious to replicate its success. Qatar’s $15.5 billion Hamad International airport, whose opening in Doha was scheduled earlier this year but has been delayed, will more than double the city of Doha’s capacity to 55 million passengers a year (Doha is already home to Doha International Airport). Hamad is two-thirds the size of the metropolitan Doha area and will have 270,000 square feet of retail space and a 100-room hotel. The airport will also boast its own monorail network and a residential district that will house 200,000 workers.
The newest entrant in this airport arms race, Abu Dhabi, has started work on a $3 billion international terminal that will triple its capacity to 40 million passengers by 2017. The new terminal is an integral part of Plan Abu Dhabi 2030 (pdf), an Emirate-wide strategy to diversify the economy away from oil by focusing on business and tourism growth. The terminal is also crucial to the fate of the national carrier Etihad, which trails regional rivals Emirates and Qatar Airways. The airline has been aggressively expanding its network through partnerships and minority stake investments, and is now betting on the new terminal attracting a bigger share of the passengers who pass through the region during international travel.
But aviation experts caution (paywall) that this hectic expansion could lead to a capacity glut. Traffic on the main route that these three cities prize—between Europe and Asia—is expected to rise only by 120 million passengers annually by 2031, well short of the planned capacity expansion. An economic slowdown or an increase in airline fuel costs could further upset calculations. On the other hand, if traffic picks up, there is the issue of congestion. For instance, the Dubai airport is only two hours by road from the one in Abu Dhabi. Increasing the number of aircraft in that confined space could lead to delays, and reduce the region’s appeal as a hub for transit traffic.