Looking down from the motorway flyover that sweeps over Dubai’s busy Airport Road towards the headquarters of Dubai Aviation Engineering Projects (DAEP), one is presented with a physical metaphor of the organisation behind the development of Dubai’s spectacular aviation infrastructure.

Sitting at the southern boundary of Dubai’s enormous international airport complex, the compact, modern office building that mirrors the architectural curves of the nearby airport terminals is integrated into the airport’s activities, but does not disturb them.

The building is surrounded by construction work to develop new, expanded aircraft parking stands, just as DAEP sits at the heart of one of the world’s biggest airport development programmes.

Working hand-in-glove with its sister organisation, Dubai Airports, DAEP has helped Dubai International become the world’s third-busiest airport, with more than 56 million passengers passing through its halls in 2012.

Over the past two years, the partnership between Dubai Airports and DAEP has executed a $7.8bn capital investment programme to deliver two concourse buildings at the airport and a raft of major associated facilities. It has built two terminals at the new Al-Maktoum International. January saw the opening of the world’s first purpose-built terminal for handling the huge A380 superjumbo aircraft manufactured by Europe’s Airbus consortium.

Significant steps

The next landmark will be achieved on 31 March, when Australian airline Qantas officially begins operations from Dubai after announcing in September that it was relocating its hub from Singapore to better serve long-haul traffic between Europe, Asia and Australia.

Each breakthrough represents an important strategic success for Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, and for Dubai’s aviation sector, led by Sheikh Ahmed bin Saeed al-Maktoum, president of Dubai Civil Aviation Authority, chairman of Dubai Airports, and chairman and chief executive of Emirates airline. They are significant steps on the road to delivering the vision of Dubai becoming the world’s biggest hub for transportation.

We examine statistics, conduct sensitivity studies and have forums that capture the issues likely to affect growth

Suzanne al-Anani, DAEP

So successful has been the development of Dubai’s aviation sector over the past two decades that today it contributes about 28 per cent of the emirate’s economic output. That figure is expected to top 32 per cent and account for 22 per cent of total employment by 2020. This does not include the significant contribution the aviation sector makes to Dubai’s hotel and tourism industry.

Despite 20 years of success for the emirate’s aviation programme, there will be no let-up in the pace of development. Despite being only two and a half years into its Strategic Plan 2020, which outlined a $7.8bn programme to deliver 90 million passengers a year through Dubai by 2020, Dubai Airports’ passenger volumes are ahead of expectations. In 2012, 57.6 million passengers passed through Dubai and 66 million are forecast this year.

Long-term strategy

“We have lifted aspiration to 100 million passengers by 2020,” says Dubai Airports’ chief executive officer (CEO) Paul Griffiths. And plans are already well advanced to take Dubai’s aviation sector much further.

“We are currently planning for 200 million passengers by 2045,” says DAEP CEO Suzanne al-Anani. “The 2020 plan is almost outdated. We are currently finalising a major sensitive study on Strategic Plan 2045. We are preparing for a major presentation to the aviation sector board in May for Strategic Plan 2045, where we will get direction on the way forwards.”

The 200 million goal is a huge target, and achieving it will require significant levels of investment in airport infrastructure, services and capacity. But Griffiths and Al-Anani say it is the only way they can deliver on the mission statement handed to them by Sheikh Ahmed, a goal that is simple, yet daunting.

“Suzanne and I work under just one very clear directive from His Highness Sheikh Ahmed, and that is not to constrain the growth of the aviation sector in Dubai,” says Griffiths. “That is our very simple, significant, single objective.”

Airport infrastructure

It is a daunting challenge that Dubai Airports and DAEP tackle as lead partners in a wide-ranging group of aviation sector stakeholders that range from the airlines through to Dubai Police.

“It is a lot of pressure,” says Al-Anani. “But it has been like that for a long time. I think we are becoming addicted to it.”

Understanding the impact of airport infrastructure on passenger growth requires constant tracking of passenger trends and data on passenger forecasts and passenger growth.

“We are always examining statistics and conducting sensitivity studies, and we have regular forums that capture all the issues likely to affect growth, such as any changes in legislation, Emirates’ plans and so on,” says Al-Anani.

The findings of these studies are then reviewed every quarter at high-level aviation sector board meetings. “We have been providing infrastructure to this airport for more than 20 years, and it is never going to stop,” says Al-Anani. “But the benchmark is becoming higher. With the delivery of concourse A [formerly concourse 3], it is now the end of this phase of expansion. But with the latest growth expected for Dubai International airport, Emirates airline and the other foreign airlines, we have a very big task very quickly to provide enough infrastructure, so that we do not hinder growth in the aviation sector.”

Such is the rapidly accelerating pace of growth in Dubai’s aviation sector, that Griffiths and Al-Anani find themselves looking further and further ahead to develop their plans.

“You start with a forecast and work back,” says Griffiths. “We are looking 32 years ahead. It starts with projecting likely traffic numbers, and by assessing what market share Dubai could capture. So we sit down mostly with Emirates and [local low-cost carrier] FlyDubai, but also with input from some of the other airlines that operate here.”

High target

While Emirates and FlyDubai represent more than 60 per cent of Dubai International’s traffic, they have been the catalyst for other carriers to fly through Dubai, and today more than 150 airlines operate in the emirate. Emirates has about 90 A380s on order, and this number may rise further.

Al-Anani says there are two primary areas to work on in meeting the required passenger levels. The first is maximising airfield capacity through major infrastructure development. The second is building terminal capacity and developing the passenger processing systems inside the terminals. To meet its target of 200 million passengers a year by 2045, Dubai Airports will accelerate the development of its new complex - Al-Maktoum International airport - at Jebel Ali, close to the border with neighbouring Abu Dhabi.

“We can accommodate more than 100 million passengers at Dubai International airport,” says Al-Anani. “And until we have substantial capacity at Al-Maktoum International airport, we have to do capacity enhancement at Dubai International airport. Strategic Plan 2020 contains airfield improvements, modifications of stands to suit A380s, concourse A, concourse D [formerly the planned concourse 4], Terminal 1 modifications, and upgrading and enhancing capacity at Terminal 2 for FlyDubai and others, as well as a lot of other facilities. So we have to work on very fast-track provisions here.

“Of course, time and money are against us so we have to come up with efficient designs, fast delivery and value engineering. In addition, we have a passenger terminal at Al-Maktoum International airport currently undergoing operational readiness [trials],” she adds. Central to the plan is the migration of Emirates to Al-Maktoum International.

“Emirates will outgrow [Dubai International] airport and will have to move,” says Griffiths. “So 2025-27 is the current target date for the new airport to have capacity.”

One of the key challenges in sustaining the enormous capital investment programme is ensuring funding is available. Since the 2008 global financial crisis, it has become far more expensive to raise capital on the debt markets, especially since Dubai is already carrying significant obligations.

“There is no doubt about it,” says Al-Anani. “There is a big challenge that will govern the pace of development, but it will not limit. DAEP is working on options for financing, together with the concerned government departments. We usually work with government agencies to ensure financing is raised. Cash flow is worked on jointly, along with master planning. Phasing is also worked on jointly.”

Funding development

According to the 2020 plan, rising passenger numbers will boost commercial revenues that will be used to fund the development.

The Department of Finance is the engine of the financial train in the aviation sector, and the aviation sector’s contribution is fundamental to Dubai’s economy,” says Griffiths. “So there is a cycle where the aim is to provide capacity for the sector to grow, and the more it grows the more can be reinvested. It is a good financial model.”

Last year, the government raised finance through several vehicles to help fund the airport’s development. In April 2012, it raised $1.25bn in a sovereign sukuk (Islamic bond) that Sheikh Ahmed said would be used to fund expansion at the airport.

In June 2012, Dubai Duty Free (DDF), which is owned by Dubai sovereign wealth fund Investment Corporation of Dubai, raised $1.75bn from a group of 15 mostly local banks. The funds will be put towards the expansion of the airport. The deal was backed by cash flows from the retail outlets operated by DDF, which announced annual sales of $1.6bn in 2012, a 10 per cent increase on the previous year.

Al-Anani says Dubai is unlikely to seek private developers to deliver its plans.

“For sure, there will be multiple models of financing employed by the government, but we will never go into finance-and-operate models,” she says. “The government will always want total ownership of its assets; I don’t think the government is looking at anything like [public-private partnerships].”

Rather, DAEP and Dubai Airports will continue to work hard, but seamlessly, together to deliver Dubai’s aviation vision.