Sustaining growth will be a challenge for smaller players

With Ajman, the emirate adjacent to Sharjah, booming, and the population from Dubai and Sharjah spilling into it, it was only to be expected that it would sooner or later announce its own international airport. This week it made that announcement.

However, with seven airports located within a 100 kilometre radius, and three of them galloping ahead of the others, it is yet to be seen how the later entrants make themselves sustainable. Analysts agree that the newer airports are not going to - or rather will not be in a position to - compete with Dubai and Abu Dhabi.

"When I saw the news I was shocked, but when I read the details, I saw they used two very reputable consultancies [ICTS Europe and Booz Allen Hamilton]. These people know what they are doing," said Rashed Al Khanjari, chief consultant at Enterprise Consultancy.

He says timing is also important, while reminding that Ras Al Khaimah airport has been in existence for years, but has struggled somewhat to take off. "I think it is the right time [now], with the anticipated growth in population and development of the emirate."

The business will be there, he suggests. "The UAE has become the gateway for a lot of nearby countries like Iran and the Russian bloc. And of course there is always the traffic from the subcontinent."

Density of capacity may still become an issue, though. "Indeed there are several airports within a short flying range, and may be [the news] is due to a local emirate's own pride in the first place, but also it should be looked upon as a pillar of modernisation in its future planned growth," says Alan Bourjeily, general manager of aviation engineering for Data Processing Systems.

Important driver

"It seems the desire of each emirate to fulfil its potential is an important driver. An airport is a key part of growth infrastructure," concurs Rohit Talwar, CEO of UK-based Fast Future, which recently issued a report titled 'The Future of Travel and Tourism in the Middle East'.

Sustaining growth in the medium to long term would be a highly challenging task for the smaller airports, especially with the huge development and expansion plans of Dubai, Abu Dhabi and Sharjah, says Bourjeily. In fact, analysts believe they are going to cater to a niche market.

Talwar feels that one of the models is to concentrate on low-cost carriers, a sustainable model it seems, based on the recent performance in the region.

"Low-cost carriers such as Jazeera are having problems in landing at airports like Dubai, with all these international airlines coming in," says Al Khanjari. "Airports like Ajman, Ras Al Khaimah are going to be the [alternative]. They will be cheaper to operate and easier for them to land."

Another possibility is for these destinations to develop their own integrated niche budget travel and tourism propositions, combining reasonably-priced hotel rooms with budget air fares, says Talwar. "There is a huge pent-up demand to be serviced at every level - from ultra-budget to ultra luxury - and so in the short to medium term it is unlikely that we will see massive unused capacity."

The Ajman airport projects a million passengers after three years. "That's a realistic number," Al Khanjari says, with the expected rise in population and expansion of business and tourism ventures in the emirate.

Logistics

The report specifies that 64 per cent of the business will be logistics. Pricing, in relation to the much ambitious Dubai's upcoming logistics hub, would decide whether that's an exaggerated figure or not, says Al Khanjari.

Location comes into play. "Ajman, for example, could handle the excess passenger and cargo spilling over from neighbouring emirate Sharjah," Emil Rademeyer, director of Proleads, a Dubai-based research consultancy, says.

The determining factors for success or failure are various. Making the host emirate a destination of tourism and business development, in addition to promoting good passenger services at competitive prices to attract passengers from nearby emirates, will decide the success of the airport, says Bourjeily.

The success of these airports also depends on factors beyond the aviation operations.

As evidenced by Dubai and Abu Dhabi's successful creation of Airport Free Zones, Rademeyer says the forays into non-aviation activities can be a key ingredient. The concomitant real estate development could very well add to higher econ-omic returns, and even provide the funds for expansion of these smaller airports, he says.

Given the pace of hotel construction, there will be a lot of leisure travel opportunities on offer, Talwar points out. "So, assuming the marketing is in place, then the demand for air seats will be there."

As for rivalry among the smaller players? "There will be competition, and it may affect their sustainability. [It] all depends on how efficiently they are managed," says Bourjeily.

Making the host emirate a destination of tourism and business development ... will decide the success of the airport.