Rehabilitating the aviation sector and the Iraq economy

07 June 2011

A modern, expanded aviation sector is essential for trade and economic growth in Iraq. Baghdad has now drawn up a multibillion-dollar masterplan to rebuild the industry

Key fact

Total passenger traffic a year in Iraq is forecast to reach 22.5 million by 2016 and rise to more than 25 million by 2022

Source: MEED

Falah Mustafa, head of foreign relations at the Kurdistan Regional Government (KRG), sits in a small reception room in the ministry, which lies on an unassuming street of the capital Irbil.

“We don’t want to live in isolation anymore,” he says simply.

Iraq airport passenger capacity
Airport(Passengers  a year)
Baghdad International airport7,500,000
Mosul Airport500,000
Basra International2,000,000
Suleymaniyah International350,000
Irbil International3,000,000
Najaf International3,000,000
Sources: National Development Plan 2010-14; MEED

Although he is referring to Kurdistan, the relatively stable region in northern Iraq, the same sentiment can be applied to the rest of the country. After years of war and destruction, Iraq is embarking on an aggressive path of rehabilitation and economic growth.

Following in the well-trodden footsteps of its Gulf neighbours, Baghdad has drawn up a $60bn blueprint for its developing aviation industry, the Iraqi National Aviation Plan.

Aviation is a key sector for Iraq’s economy

Iraq is planning to rebuild itself across all sectors, but the aviation industry is instrumental to the growth of trade and, therefore, the economy as a whole. The plan involves investing billions of dollars in new airports, logistics centres, cargo and warehousing facilities, as well as upgrading existing airports over the next 10 years.

Iraq currently has six international airports – in Baghdad, Mosul, Basra, Irbil, Suleymaniyah and Najaf – with a combined capacity of 16.4 million passengers a year.

Total annual passenger traffic in Iraq is forecast to reach 22.5 million by 2016 and rise to more than 25 million passengers by 2022. By this point, freight is predicted to reach 900,000 tonnes of cargo a year.

The plan is extensive and ambitious by any standards. The fact that Iraq is planning it makes it all the more challenging; attracting the required investment while security in the country is still an issue will be a huge obstacle.

So far, the area where most progress has been made in rehabilitating the aviation sector is in the northern province of Kurdistan. Irbil is one of three governorates that comprise the Kurdistan region, the other two being Duhok and Suleimaniyah.

Attracting the required investment, while security in the country is still an issue, will be a huge challenge

The KRG has major plans to develop the region. These include building up a tourism industry and establishing Irbil – Iraq’s fourth-largest conurbation – as a major business centre. Such ambitions demand an expanded and modernised airport. Over the past five years, it is estimated the KRG has invested $4bn in infrastructure projects. The private sector has pumped an additional $13bn into schemes, including the new Irbil International airport.

The new $450m Irbil International airport opened in September 2010 with a capacity of 3 million passengers a year, and boasting the fifth-largest runway in the world and 16 gates.

An ambitious masterplan has been drawn up that will see the airport expand further to incorporate an airport city. The Irbil International Airport Masterplan 2030 features hotels, a cargo city, maintenance, repair and overhaul facilities, flying academies, office and retail facilities, a convention centre, theme parks, a hospital and clinics, a warehousing and logistics city and a golf course.

Baghdad Internatioal airport rehabilitation

Most of Iraq’s proposed aviation budget will be spent on the urgent rehabilitation of Baghdad International airport. This project is estimated to cost about $51bn and will be carried out in five phases up to 2030. The first phase runs until 2014 and includes the rehabilitation of the existing three terminals and the runway. Two of the terminals are currently operational, while the third was destroyed during the 2003 Iraq war. The third terminal requires a complete overhaul of all the infrastructure, including the terminal building itself, lighting, access roads and transit corridors. Ali Jawad Khadum, director of Baghdad airport says he hopes the construction tenders will be ready to be issued by the end of 2011.

Subsequent phases will involve building cargo terminals, an airport city, logistics and warehousing facilities and hotels. The entire project is expected to need a 1 million-strong workforce and will create job opportunities for many Iraqis.

Airport projects are also planned for major cities elsewhere in the country. The development of Suleimaniyah airport over the next 20 years will also see passenger capacity increase to 3.5 million a year from 350,000 in 2010. The planned expansion includes the construction of a cargo terminal, warehouses and additional aprons. A new international airport is also planned for Duhok, the northern-most region in Kurdistan. The airport will have a capacity of 1 million passengers a year and will provide a hub for visitors to tourist sites in Duhok. In November 2010, Lebanon’s Dar al-Handasah was awarded the contract to design the project. Other expansions are planned or under way at Kirkuk airport, Basra and the Middle Euphrates International airport in Karbala.

Tourism market in Iraq

France’s Aeroports de Paris Ingenierie (Adpi) won the contract in 2009 to select a site and carry out the masterplan for the Middle Euphrates International airport development. The design is expected to be finished at the end of 2011, with tenders issued in early 2012.

The Middle Euphrates airport is being built between the cities of Karbala and Najaf, 100 kilometres southwest of Baghdad. It will serve the millions of Shia pilgrims and tourists that visit the two cities each year due to the number of shrines and areas of religious significance.

The media [portrays] images of war … Unless it is safe and secure, we cannot do these [projects]

Falah Mustafa, Kurdistan Regional Government

The airport will be developed in three phases. The first will have a capacity of 6 million passengers a year. Work will involve building two passenger terminals, one of which will serve normal traffic with the other specifically used by pilgrims. Phase one will also involve the construction of a 4-kilometre runway, a 40-metre-high air traffic control tower and 29 aircraft stands. The second phase will see capacity increase to 12 million passengers a year and the third phase will bring capacity to 19.5 million passengers a year. The plans also include building a 50-hectare airport city at the entrance to the airport.

Security continues to be the main obstacle to developing Iraq’s aviation sector, making projects more costly and difficult to execute.

“Unless it is safe and secure, we cannot do these [projects]. The media [portrays] images of war and if these continue, we will be disadvantaged,” says Mustafa.

Baghdad has said it will invest $17bn towards the total cost of the aviation masterplan, leaving $43bn to be found from the private sector. The civil aviation authorities are currently working to generate interest in the projects. At the Iraqi Airports Expansion conference held in Irbil in April, representatives of the aviation authorities outlined Baghdad’s commitment to the investment plans, which should go some way to establishing confidence in this emerging market. Companies such as the US’ Boeing, France’s Adpi and Germany’s Lufthansa are already present in Iraq.

A further sign that authorities are serious about developing the country’s aviation sector is the decision to halt the dissolution of national carrier Iraqi Airways. The instruction came from the highest levels within the government, suggesting that a national carrier is instrumental to Iraq’s development plans. The emblem of the airline has now been modified to reflect the aspirations of modern day Iraq. The original green colour, affiliated with Saddam Hussein’s regime, has been changed to blue as a symbol of peace, say sources at the airline. Iraq began the process of dissolving its national carrier in mid-2010, in response to a long-running dispute with Kuwait over war reparations from the 1990s.

Airline dispute

Kuwait Airways says Iraqi Airways owes it billions of dollars, including $1.2bn related to aircraft and aircraft parts seized during Saddam Hussein’s 1990 invasion of Kuwait. Iraqi Airways had several aircraft on order from the US’ Boeing, worth about $5bn at list prices. The order is for 30 Boeing 737 aircraft, the first of which will be delivered in July 2013. Boeing is also due to deliver 10 787 Dreamliner aircraft in 2020. The aircraft will now be delivered directly to the Iraqi government rather than to Iraqi Airways.

As reconstruction gets under way, Iraq is set to become a major centre of construction activity in the region. Its project market is the fastest-growing in Middle East with $350bn of projects planned or under way. Several regional carriers have launched services to the country to capitalise on this, including Emirates, Etihad Airways, Flydubai, Gulf Air, Air Arabia and Bahrain Air.

To cope with increased air traffic, it is essential Baghdad executes its $60bn aviation masterplan. Attracting investors will be a challenge in the current political climate.

“All of Iraq has a need for a secure and safe environment. It has the potential for growth. Now in Irbil, with the [construction] of new hotels, we have the chance to [host] more conferences and events,” says Mustafa.

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