Mega Mecca

by Benjamin Joffe-Walt
Monday, April 26, 2010

After decades of underinvestment, Islam's holiest city is finally getting an airport.

Saudi Arabia's legislature has approved plans to build an international airport outside Islam's holiest city in an effort to cater to more than two million pilgrims who visit the city each year.

The Shura Council, Saudi Arabia's advisory legislature appointed by the king, unanimously approved the airport. It was part of a proposal in the General Authority for Civil Aviation's annual report to the body.

Since only Muslims are permitted to enter Mecca, the council recommended that the new airport be located outside the city center, so as to allow both Muslims and non-Muslims to fly into the region.

The new airport is part of a Saudi government decision to end decades of underinvestment by allocating tens of billions of dollars to improve the kingdom's transportation infrastructure so more Muslim tourists vacation there and spur the economy.

"You have two types of growing aviation economies in the Middle East," Philip Butterworth-Hayes, an aviation expert and the editorial director of PMi-Media Ltd, told The Media Line. "There are those based on domestic demand and those based on international demand. Saudi Arabia has always had a huge domestic potential aviation sector which has not yet been fully realized. If you look at the potential number of business jet operators and first class passengers, the potential growth is enormous."

"The problem is the industry has been very heavily regulated," he said. "So growth in aviation in the region has gone to the UAE, which has become a major global aviation player. People are now transferring through Dubai rather than Frankfurt or Asia, but Saudi Arabia has actually been much better placed to take on that role because it has the funding and huge amounts of international traffic."

"Now, Saudi is starting to take it's proper role as the next gulf based aviation powerhouse," Butterworth-Hayes said. "So it's not just new airport construction, there are new airlines, business aviation, and new aerospace manufacturing - the four markets which until now have been the reserve of Abu Dhabi and Dubai."

Last year Saudi aviation officials announced plans to invest more than $12 billion in the next decade overhaul the kingdom's airports. It will be setting up a new holding company to manage a total of 27 eventual aviation hubs. Abdullah Rehaimi, president of Saudi Arabia's General Authority for Civil Aviation, has indicated that the company will initially be government owned but will "likely" be privatized "when the time is right."

The plans include new airports, the expansion of of existing airports, a much more extensive rail network, new highways and a new, dedicated pilgrimage airline.

The International Finance Corp, an arm of the World Bank, is assisting Saudi Arabia in the development of three international airport cities in Jeddah, Dammam and the capital Riyadh.

Next month Saudi aviation authorities will float a tender to build the kingdom's first privately owned airport in the Islamic holy city of Medina. The facility, to be built at an estimated cost of at least $1.8 billion, will have a capacity of eight million passengers a year when completed around 2014. It will replace the existing Prince Mohammad Bin Abdul Aziz domestic airport.

David J Bentley, an aviation expert and Joint Managing Director of Big Pond Aviation, said that after watching the boom in its neighbors' aviation industries, Saudi Arabia is beginning to emerge as a serious player.

"While religious tourism remains critically important, thus explaining the investment in airports at Medina and Mecca, the authorities must cast an envious eye in the direction of Dubai, Abu Dhabi and Qatar, the other emirates that are starting to build a tourist product of their own and Oman, which is rapidly joining them," Bentley told The Media Line. "Almost 25 Saudi Arabian airports are being expanded or built in order to attract foreign vacationers and 'airport city' complexes are to be added to some, for example at Jeddah, Riyadh and Damman,"

"We see the decision by the Saudi authorities to allocate billions of dollars to airport investment as being testament to the changing tide of opinion inside the Kingdom in favor of a more relaxed approach to both Gulf area and wider, global, incoming tourism after decades of inertia," Bentley said. "The sheer scale of this investment ensures that foreign expertise and capital will be required. Shortlisted companies for the Jeddah Airport City project for example, include both Australian and US concerns and it is likely that some innovative financing variations on the traditional and popular build-operate-transfer schemes will evolve in what is a new investment climate for foreign investors."

Source: The Media Line.
Link: http://www.themedialine.org/news/news_detail.asp?NewsID=28678.