Historical Overview: The 40-Year Rise of UAE Aviation

As the United Arab Emirates celebrates its 40th anniversary, Aviation Business takes a special look at the country’s sky high ambitions to become the global aviation superhub of tomorrow.

2010s and beyond: A Bright Future

A year later than expected, Al Maktoum International Airport opened for cargo operations in June 2010 with the passenger side expected to commence in 2012. The scale for the US$33 billion airport is mind-blowing. Once fully completed, the development will comprise of five runways, four passenger terminals with a potential capacity to accommodate a 160 million arrivals a year, and 18 cargo terminals.

As the last year in the UAE’s 40 year aviation journey, 2011 has continued to impress and inspire. IATA (International Air Transport Association) has predicted that the UAE will be the second fastest growth market for international passenger traffic from 2009 to 2014 (just behind China). In fact the country has never been better placed to cope with this expected continued growth. Emirates Airline has already posted a record US$1.6 billion profit. In a further sign of huge market confidence, last month the carrier placed the largest dollar order in Boeing’s 95-year history, valued at a staggering US$26 billion. Its nearest rival, Etihad also reported an increase in revenue of 39% to US$1.1 billion in the third quarter of this year, its highest quarterly result ever with passenger numbers rising 18% to 2.25 million. On track to breakeven in 2011, the carrier is confident of making a profit next year and has added six more aircraft to its fleet in the past year.

Airport developments also hold strong for the future. Earlier this year, Dubai Airport announced a US$7.8 billion expansion plan to increase its annual passenger capacity from 60 to 90 million passengers by 2018. As part of this, the airport’s dedicated A380 facility, Concourse 3 is set to open in 2012 at the same time as giant Dubai World Central-Al Maktoum international commences its passenger services. Abu Dhabi Airport continues to implement its expansion plans, aimed at increasing passenger capacity from 20 to 40 million passengers by 2030. Work on the huge Midfield Terminal Building is promised to start shortly. Once opened in 2017, this 700,000 metre building will be home to Etihad Airways. Other emirates are also gunning up their airports. Savvy enough to appreciate that competing for passenger and cargo traffic with Dubai and Abu Dhabi, Fujairah airport boasts an executive terminal and growing share in the UAE’s business jet market. Rather than compete for passenger and cargo revenue, Fujairah has been investing heavily in infrastructure development to become the UAE’s centre for aircraft dismantling. RAK Airport too has been experiencing steady growth in both passenger and cargo movements, with a 3769m long runway, two passenger terminal buildings and a cargo terminal facility.

Over these past four decades, the UAE has carved an impressive platform for itself on the global aviation arena. Alongside the enormous airport and airline expansions, the region has seen knock-on success in associated aviation niches such as the MRO industry, aviation training providers and cargo operators. Nevertheless, the region’s fast-paced and seemingly relentless growth has not been without its critics. Earlier this year, three European airlines (Air France, British Airways and Lufthansa) were involved in a public battle of exchanges with the ‘big 3’ Gulf carriers (namely Emirates, Etihad and Qatar Airways). and this politically-charged debate for ‘a level playing field’ looks set to continue. However, the future still bodes well for the industry as it approaches its next decade with a cool head and a plan for consolidation and further growth.

CLICK HERE FOR THE PREVIOUS DECADE: 2000s: Overcoming Challenges

It appeared as if the UAE, and Dubai in particular, could do no wrong when it came to maximising the potential of its fast-growing aviation sector. But the next decade would provide a wake-up call for even the strongest market players as the world was challenged by a lethal mix of terrorist attacks (September 11th), a hard-hitting global recession and continued Middle East political unrest. Yet almost impervious to the impact, Emirates continued to post an increase in passenger figures, rising to 6.8 million in 2002 with cargo up to 400,000 tonnes. Closely watching the success of its Emirati neighbour, Abu Dhabi launched its own carrier, Etihad Airways, with an initial investment of around US$136 million. Etihad started with commercial flights in 2003 and rapidly extended its network. By 2010, its fleet had grown to 56 aircraft serving an international network of 66 destinations. Although not quite reaching the escalated purchasing levels of Emirates, Etihad announced one of the largest aircraft orders ever for up to 205 aircraft at Farnborough Airshow 2008. A year later, it was reporting a rise in passenger traffic from 6.0 to 6.3 million, with total revenue exceeding $2.3 billion.

Although Emirates and Etihad’s spending sprees dominated the headlines in the 2000s, a niche market attracted the UAE’s attention. Low cost airlines had been growing immensely across Europe and the United States, and the UAE launched what would go on to become one of the Middle East’s largest low cost carriers, Air Arabia, in 2003. The Sharjah-based airline has served well over 20 million passengers and grown staunchly in its short lifespan to date. Hot on its heels was the region’s second budget carrier, flydubai, established five years later in 2008. By 2011, the flydubai fleet had grown to include 20 Boeing 737-800 aircraft. Possibly the most affected by the financial crisis out of all the UAE’s airlines, Ras Al-Khaimah’s carrier, RAK Airways, set off to an inauspicious start. Originally launched in 2006, the carrier had to close operations in 2009 before re-emerging a year later with a ‘value for money’ business model between the full-service and low cost markets.

Abu Dhabi Airports Company (ADAC) was formed in 2006 to operate Abu Dhabi International Airport and its ambitious multi-billion dollar expansion plan. As the plan unfolded, a second runway was opened in 2008 together with an exclusive terminal for Etihad (Terminal 3) in the next year. This increased the airport’s passenger handling capacity from five to 12 million passengers a year. Sharjah Airport also showed steady growth, developing a strong reputation in cargo services. In 2006, the airport reported a year-on-year rise in aircraft movements by 14.2%, with 36.9% passenger growth to 3.064 million passengers and freight handling increasing to 569,511 tonnes.

As the region’s aviation industry continued to enjoy success, the dark shadow of economic recession began to spread across the globe towards the end of the decade. Whilst some industries in the UAE took a battering, the surprisingly-buoyant aviation sector managed to shield itself from much of the recession’s impact.

Dubai International Airport celebrated its own 50th anniversary in 2010 as one of the busiest airports in the world, a couple of years after Emirates’ own terminal 3 had started operations in 2008. As orders from a recession-weary Europe and the US took a backseat, Emirates continued to show defiance, continuing its fleet expansion plans at
a voracious rate to become the world’s largest Boeing 777 operator.

Private jet sales were also flourishing due to the region’s fast-growing business aviation sector, with an upsurge in private jet companies and associated services. The region experienced an increase in the number of FBOs in both Dubai and Abu Dhabi, with the latter going one huge step further with the completion of an airport exclusively for the business aviation sector. Set up at the old Bateen Airport site in 2008, the new Al Bateen Executive Airport is undergoing a multi-million dollar expansion programme and has already reported a sharp 36% increase in commercial aviation traffic through 2010 compared to the previous year.

To keep up with the enormous aviation potential, the DCA underwent a major restructuring in 2007, resulting in the creation of Dubai Civil Aviation Authority (DCAA) as the local regulatory body, and Dubai Airports as the owner and operator of Dubai’s two airports – Dubai International and Dubai World Central – Al Maktoum International. The latter is touted to become the largest aviation hub in the world.

CLICK HERE FOR THE PREVIOUS DECADE: 1990s: Thinking Global

If the 1980s was the decade where the huge revenue generating potential of the UAE’s aviation industry was recognised, the 1990s represented the period of its realisation as a serious global contender. It was in 1996 that the General Civil Aviation Authority (GCAA) came to play, created by the government to regulate civil aviation and to strengthen this phenomenal pace of growth.

Emirates continued to grow from strength to strength, with seemingly endless aircraft purchases throughout the 1990s. As well as taking delivery of six Boeing 777-200s, the carrier added a US$2 billion order to its long list for 16 Airbus A330-200s in 1997. More scheduled destinations were added to its network, including Manchester, Paris and the real win for the any airline – a coveted place at the busiest international hub in the world, London Heathrow in 1991. By its tenth anniversary in 1995, Emirates was flying to 34 locations in the Middle East, Far East and Europe. Posting record profits by 1998, the carrier was boasted passenger figures of around four million with cargo reaching 200,000 tonnes by the end of the decade.

With passenger arrivals at Dubai International hitting a staggering 11 million, Dubai’s government continued to pour investment into the region’s thriving aviation sector. The US$500 million Terminal 2 was opened at the airport in 1998, followed by the Sheikh Rashid Terminal a couple of years later.

Dubai Airport Freezone was also established within the boundaries of the airport in 1996 as part of a strategic plan to attract more investors into the region.

CLICK HERE FOR THE PREVIOUS DECADE: 1980s: High Ambitions

Flanked by visionary leadership, the UAE was beginning to see huge growth potential in the aviation industry, not least due to its geographical position as a gateway between East and West. It was during the 1980s - against a backdrop of increasing global privatisation and capitalism - that the UAE began to really push the limits of its growth. This period saw the birth and exuberant rise of Dubai’s homegrown carrier Emirates Airline. In 1984 Sheikh Mohammed and Maurice Flanagan (then general manager of dnata) came together with the idea of starting up a national airline for the emirate.

A year later, Flanagan was introduced to Sheikh Ahmed, president of Dubai’s Department of Civil Aviation (DCA) at the time and a key figure in driving forward the vision of growth for the carrier. With US$10 million to launch an airline in only five months, Sheikh Ahmed and Tim Clark (the future president of Emirates) joined forces with a determined Flanagan to take up the challenge with a vengeance. The maiden flight for the airline – the EK600 to Karachi in an aircraft wet-leased by Pakistan International Airlines – went ahead in October 1985 despite poor ticket sales.

However 1986 would be the first and only time in Emirates’ history that the airline would report an annual loss. Undeterred, the carrier’s network reach continued to grow rapidly and its fleet slowly began to expand with the delivery of the carrier’s first bought aircraft in 1987 – an Airbus A310-304 - the first of what would stack up as one of the world’s biggest purchased fleets. Elsewhere in the UAE, Abu Dhabi Airport moved to a new site in 1982, shedding its Al Bateen title and location, while Fujairah Airport also opened in 1987.

CLICK HERE FOR THE PREVIOUS DECADE: 1970s and before: The Early Days

1970s and before: The Early Days

It was under the patronage of the late Sheikh Zayed that the United Arab Emirates was created in December 1971. Abu Dhabi and Dubai were first to form the union, followed shortly by what would become the remaining five emirates - Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. The two leading emirates in particular would be hugely influential in paving the way forward for the newly-formed UAE in the global aviation scene.

Before unity, the country had been taking baby steps into the fast-developing aviation world. In 1959, Dubai government had already established dnata, a small five-strong team providing ground handling services at what would officially become Dubai International Airport in 1960. This set the ball rolling for a flurry of airport openings across the UAE. Abu Dhabi Airport opened in 1969, under its original name of Al Bateen Airport, and Ras al Khaimah airport followed after in 1976.

A year later, Sharjah International Airport had begun operations. By 1971, Dubai International had already been operating for more than ten years albeit on a small scale with only nine airlines and twenty destinations served. Across the decade, the airport continued with a significant improvement project. As well as a new three-storey terminal, the airport acquired a new control tower, additional taxiways, longer runways and extension of aprons.

FACTS:

1976: The year in which Ras Al Khaimah International Airport was opened

20: The number of destinations served by Dubai International Airport in 1971