Non-aeronautical services ranging from retail to food and beverage accounted for 52 per cent of the Dubai Airports Companys revenue in 2015.
This change represents an important shift in the model of airport operations, which traditionally relied mainly on plane parking and baggage-handling fees.
While not all airports in the region wish to replicate Dubais model, the recent squeeze on federal and municipal budgets due to sustained low oil prices makes it easier to post the question: why not?
Granted, no single airport in the region currently comes close to Dubai in terms of international passenger traffic. However, with yield higher for international travellers, regional airports should aim to compete with Dubai in terms of services and facilities to encourage growth in airports and related sectors.
The new view of airports as a commercial enterprise rather than simply infrastructure like roads, should lead to the further expansion and modernisation of airports across the region. This is of course in addition to the explicit need to boost national security in certain countries or cities across the region.
An estimated $46bn-worth of contracts for the expansion of airport terminals and runways were awarded in the Mena region between 2006 and 2015, with the GCC accounting for 75 per cent of the total.
In 2016, $5.4bn of airport contracts have been awarded to date. This includes the $4.3bn new terminal at the Kuwait International Airport (KIA) and the civils contract for the new airport terminal in Bahrain, which is part of its $1.1bn airport modernisation programme.
This value accounts for about 45 per cent of contracts that are expected to be awarded before the end of 2016. Nearly $30bn worth of schemes are also scheduled for award in 2017, according to data from regional projects tracker MEED Projects.
It now appears likely that a significant proportion of these planned projects will be delayed due to strained government budgets.
|Airport contract awards ($m)|
|Source: MEED Projects *2016 (estimates) 2017 (forecast) na: not applicable|
As a result, it is foreseeable that some of these schemes, such as the Terminal 6 at Riyadh airport, will turn to private financing to address funding gaps. Rising revenues from non-aeronautical services, in addition to the classic sources of revenue, should help build the case for the economic sustainability of future airport projects in many cities that are aspiring to become travel hubs like Dubai.
With many urban and mainline rail schemes across the GCC now delayed or on hold, it is understood that consultants are attempting to adapt the airport operations model to these projects in an effort to get them off the ground and attract finacing. It is a path most policy makers or transport executives could consider although the risks are conceivably higher compared to airports.