Developers could face tough issues with Taif PPP

07 April 2016

Return on investment possible only if all umrah flights are diverted to new airport

Developers and investors who will be selected for the build-transfer-operate (BTO) contract of Taif airport in Saudi Arabia will face a major challenge in recouping their investments unless a policy to divert all Umrah flights to the planned airport is put in place.

Taif airport, which is planned to become the kingdom’s fifth international airport and the second to be developed using a BTO model, can only be successful under the assumption that annual passenger traffic reaches 20 million, where each passenger is charged $3-$4 as airport fee, and each luggage is charged at least 35 cents. “Without these assumptions, it will be difficult for the investors to achieve profitability even in a 25-30-year period,” a consultant close to the project tells MEED.

Jeddah’s King Abdulaziz International airport (KAIA) primarily serves Hajj and Umrah pilgrims, and the airport handled more than 30 million passengers in 2015. For Taif to hit 20 million passengers a year, the consultant says an agreement must be reached between the General Authority of Civil Aviation (Gaca) and the state-backed Saudi Airlines (Saudia) to divert all umrah flights, which are received year-round, to the proposed new airport in Taif.

Taif is designed to become the kingdom’s second full-fledged airport public-private partnership (PPP), following the completion of the Medina airport PPP, which entered full operation in June 2015. The $1.2bn Prince Mohammed bin Abdulaziz airport in Medina was completed on time by Tibah, which comprises Turkey’s TAV Airports and local contracting firms Saudi Oger and Al-Rajhi Contracting.

The Washington-based World Bank’s International Finance Corporation (IFC) is advising Gaca on the Taif airport PPP.

Malaysian Airport Holdings (MAHB) and a Saudi Binladin Group-led consortium are among those confirmed to have prequalified to bid for the Taif airport PPP.

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