For nearly two decades, the UAE’s various emirates have independently implemented multibillion-dollars’ worth of transport infrastructure projects to support their growing populations and economic activities.

Led by Abu Dhabi and Dubai, this approach has resulted in some of the world’s most modern, and busiest, road networks, seaports and airports, as well as the largest and fastest-growing airlines and port operators.

A common criticism, however, is that the UAE has lacked a binding national transport programme and strategy. Indeed, the tacit mantra among the country’s decision-makers has been that competition is good and, as long as these entities are profitable or the infrastructure facilitates the logistics, trade, hospitality or tourism sectors, a commonly agreed and implemented national transport strategy was less important.

This was true until recently, when market challenges began exposing the weaknesses of such an approach. Between 2016 and 2017, Etihad Rail laid off 30 per cent of its staff and suspended the procurement of stage 2 of the UAE’s federal railway network. Etihad Airways also began a restructuring programme to address multibillion-dollar losses.

Similarly, Emirates Airline and Flydubai announced a comprehensive code-sharing agreement and Dubai Aviation Engineering Projects (DAEP) delayed the award of packages for the $33bn expansion of Al-Maktoum International airport.

Positive signals

In January, the government revamped the board of Etihad Rail, the federal body responsible for the UAE’s 1,200-kilometre railway network. The new board includes more transport leaders across the various emirates, in addition to key agencies such as finance and the urban planning council. The move was seen as an indication that the country could be moving towards a more cohesive framework in terms of transport infrastructure capacity building.

This was followed in late February by the passing of the UAE’s federal rail law, which, in addition to specifying rail safety standards, aims to encourage private sector participation in the financing and provision of operation and management services for the country’s railway sector.

The same month, Etihad Rail restarted the procurement process for the next stage of the federal railway project. This sent a positive message to the market and raised hopes that an end might be in sight for the drought in major transport contract awards since 2016, when Dubai’s Roads & Transport Authority (RTA) awarded the $2.9bn contract for the Dubai Metro’s 15-kilometre Route 2020 link.

Indeed, some believe the timing for the reactivation of Etihad Rail’s stage 2 procurement has never been better.

“It is a highly competitive market and an ideal time to procure the best firms to construct and oversee the project, given the shortage of work in the region,” says Antony Di Rosa, vice-president, Rail & Transit Practice Lead for the Middle East and Africa at US-based consultancy Parsons.

Rail plans

Package A of Etihad Rail’s stage 2 will link the existing 264km mineral rail line in Ruwais to Ghuweifat, near the border with Saudi Arabia. Succeeding packages will connect the railway to Al-Ain, Jebel Ali and Mussafah, while stage 3 packages will extend the network to the northern emirates, including Fujairah.

The overall plan underpins the goal of using the railway to link the country’s main ports to improve internal trade and logistics connectivity, while also helping to foster economic growth in the country’s less prosperous northern emirates.

The county’s planned urban rail projects are also enjoying positive prospects. The RTA has this year tendered the study and design contract for the extension of Dubai Metro’s Green and Red lines – reinforcing the authority’s mandate to tackle congestion on the emirate’s roads and boost business by improving public transport infrastructure.

Dubai Metro costs and benefits, 2009-18 (AEDbn)
Operational costs 41
Benefits 66

Sources: RTA; Henley Business School

It is understood that the RTA is contemplating using the public-private partnership (PPP) model for certain segments of the planned metro extension, potentially making it one of the first projects to test Dubai’s PPP Law enacted in 2015.

In Abu Dhabi, meanwhile, the Department of Transport (DoT) extended an invite for “pre-tender consultancy services” in July to establish guidelines for the park and ride facilities; station naming rights; and retail and advertising for the much-delayed metro and light rail transit schemes in the capital.

Gusty winds

Unlike the recovering rail sector, the country’s aviation sector has been undergoing a difficult period over the past few years, with no immediate relief in sight.

EtihadEtihad Airways’ painful restructuring programme is continuing, and Emirates Airline and Flydubai are working on their comprehensive code-sharing agreement to eliminate routes duplication and boost efficiency and financial performance. So far, only Sharjah-based discount carrier Air Arabia has remained relatively trouble-free since the onset of the global aviation slowdown – caused by the oil price drop, strong dollar and geopolitical issues.

Potential merger

Rumours of a pending merger of Emirates and Etihad have been circulating, although both airlines have denied these and analysts say it would be premature.

“There are enormous sensitivities that would have to be reconciled before such a possibility,” says John Strickland of UK-based JLS Consulting. He adds that if a merger did happen, it would assist in presenting a united force for the UAE’s air transport, trade and tourism sectors.

Saj Ahmad, senior analyst at London-based Strategicaero Research, says a merger is highly unlikely given Etihad’s loss position. “I really don’t think Emirates wants to manage that debt in any way, shape or form,” Ahmad tells MEED.

A potential merger would have significant repercussions for both emirates’ aviation aspirations. Abu Dhabi expects its multibillion-dollar new airport terminal to come online in 2019. The Midfield Terminal building was conceived to support Etihad’s business during its growth period, and it will likely take many years to reach its 25-million-a-year passenger capacity and justify the $2.9bn investment it required, unless Etihad quickly turns the corner.

Al-Maktoum airport

Meanwhile, Emirates and Flydubai’s code-sharing programme, while understood to be going well despite Flydubai’s $86m loss in the first half of 2018, has impacted the development timeline for the $33bn expansion of Al-Maktoum International, Dubai’s second airport.

The original plan for Flydubai to move its hub to Al-Maktoum International as early as 2017 has been postponed. And while Emirates’ plan to move its hub there by 2025 has not officially changed, it appears that ensuring the success of the two airlines’ integration while they continue to operate out of capacity-constrained Dubai International may now take immediate priority over expanding the second airport.

Despite these difficulties, which may lead some to question the justification for the continued development of the new airport, Strickland argues that given the fact that Dubai International has run out of room, the development of a new airport is a long-term coherent vision for air transport and economic development. “Airport investment cannot be viewed based on short-term performance,” he says.