A decade ago, Iraq’s aviation sector was a difficult, unattractive and often perilous industry to work or invest in. At Baghdad airport, cargo and military planes risked being hit by missiles upon take-off, and on occasion were forced to make emergency landings.

National carrier Iraqi Airways had a definite black mark against its name. It was barred from flying in Europe and was embroiled in a long-running dispute with Kuwait Airways over the damage and seizure of aircraft during the first Gulf War.

Today, Iraq is reviving its aviation industry. Demand for flights is growing, driven by emerging investment opportunities in the oil and gas industry and a nascent tourism sector. In response to this, regional carriers such as Dubai’s Emirates airline and Qatar Airways have added more Iraqi destinations to their networks this year and have increased the frequency on existing routes.

Hefty spending on airports

To support the increased passenger traffic, Iraq’s federal government plans to pour billions of dollars into new airports and airport expansion projects. According to the 2013-17 national development plan released this month, Baghdad intends to spend up to $357bn on infrastructure developments in the next four years, of which about 10 per cent will be spent on transport.

The recent upsurge in sectarian violence in Iraq blemishes what was previously a continuously improving situation

Tony Myers, Copperchase

By 2017, Iraq’s transport industry is expected to contribute ID23.9 trillion ($20.5bn) to gross domestic product (GDP). In 2012, it contributed ID15.67 trillion to GDP. With the sector projected to grow at an average of 8.8 per cent a year, it will be one of the fastest-growing industries in the country, just behind the construction and oil sectors.

Expanding religious tourism is a particular focus of the government as it looks to foster growth in the non-oil sector. Several new airports are planned to cope with the anticipated rise in the number of pilgrims. The Transport Ministry is looking to build the Middle Euphrates airport between the cities of Karbala and Najaf in order to handle the hundreds of thousands of Shia pilgrims who visit the shrines and other religious sites in the region each year.

Many of these visitors come from Iran. After the overthrow of Saddam Hussein, the new Iraqi government signed an agreement with Tehran to welcome a certain number of Iranian pilgrims each year.

Work on the airport began in 2009, when France’s ADPI won a $41m contract to carry out designs and the masterplan for phase 1 of the project. Under the plan, the first phase of the airport will have a capacity to handle 6 million passengers a year, increasing to 12 million passengers during the second phase, while the final stage will allow 20 million passengers to use the airport. The scheme subsequently met with several delays, including a change in the selected site in 2011.

Now, however, the plans have been revived. ADPI completed its designs earlier this year and in May, the Transport Ministry invited firms to prequalify for various construction deals covering the runway, landside infrastructure and utilities.

“The Middle Euphrates airport project attracts some attention, but the overall scheme seems to be held back because of local political matters that require careful consideration,” says Tony Myers, director of the UK’s Copperchase, a company that provides systems to the air traffic control industry and has operations in Iraq. 

The construction deals for the scheme have been grouped into three packages. Package A covers the construction of a 4,500-metre runway, taxiways, aprons and airside roads. Package B covers landside infrastructure and package C covers utilities. Tenders are expected to be released this year.

Najaf aiport upgrades

Once completed, the new airport will be vying for passengers with the existing airport in Najaf, which opened in 2008 and has an annual capacity of 3 million passengers. Plans to expand the Najaf airport have failed to move forward, but this year several upgrades have been made to increase its efficiency, including a multimillion-dollar refurbishment of its fuel farm. The renovations will improve the way planes are refuelled and will encourage more airlines to consider launching routes to Najaf.

United National Oil Services (UNOS), an affiliate of Copperchase, is overseeing the scheme that involves the construction of a pipeline running from the fuel farm to the airport apron. UNOS also won a 10-year contract to provide into-plane supply for aviation fuel and is due to start supplying fuel by the end of October. This method of refuelling planes is much preferred by major airlines and will make Najaf a less costly route for carriers to operate.

Previously, most airlines did not refuel at Najaf as they thought the fuel was not suitably stored to avoid contamination with substances such as water. This meant that aircraft would have to carry enough fuel for their return flights from Najaf, pushing up the cost of the route due to the additional fuel burnt.

Regional airlines have already begun launching routes to Najaf or increasing their frequencies to the city in recent months. In January, Qatar Airways announced four-weekly flights to Najaf.

The planned airport investments are not only intended to support religious tourism. Iraq is also anticipating growth in the number of tourists in general, to visit areas of natural beauty and historical sites, particularly in the semi-autonomous Kurdistan region.

Kurdistan growth

Speaking at MEED’s Kurdistan Projects conference held in June, Khasraw Ahmad, the Kurdistan Regional Government’s deputy minister of municipalities and tourism, said he wanted to attract 4 million tourists in 2015, compared with just over 2.5 million in 2012. A new $550m gateway to the region – Erbil airport – opened in 2011, and passenger traffic has exceeded expectations.

In 2012, a total of 947,600 passengers passed through the airport, an increase of more than 50 per cent on the previous year, which places the facility four years ahead of its original masterplan.

Due to the strength of demand, plans are already afoot to expand Erbil airport, with a consultant due to be appointed soon to review the masterplan, according to a source familiar with the scheme. The airport also issued a request for proposals in September for the procurement and deployment of a new IT network infrastructure, a server system and a call centre. 

Another airport is being built to better serve the Kurdistan region at Dohuk. In March, a joint venture of Turkey’s Makyol and Cengiz was awarded an estimated $200m construction contract and earthworks have started on site. 

The Dohuk facility will be the third airport in the region and is expected to be completed by 2015. Phase 1 of the project will have capacity of 328,000 passengers a year, with final phases increasing capacity up to 1.1 million passengers.

Elsewhere, there are plans to expand airports in Mosul and Baghdad to meet the anticipated demand for travel into these major Iraqi cities.

ADPI has been working on the masterplan to increase Baghdad airport’s capacity to 15 million passengers a year, from 7.5 million. At Mosul, Germany’s Lufthansa Consulting signed a deal last year to work with the airport to attract new airlines and expand aviation-related businesses.

Iraqi Airways has also been responding to the pick-up in demand, adding new routes and expanding its fleet of aircraft.

In February, the Baghdad-based carrier launched its first flights to London, after the route had been suspended for more than 20 years. In the same month, the airline resumed flights to Kuwait after settling a dispute with Kuwait Airways, paying out $500m in damages for the seizure and destruction of its aircraft. Iraqi Airways also plans to launch new routes to Chinese destinations in October. 

The carrier is working to revamp its fleet as well. In August, it received the first delivery of next-generation 737-800 Boeing aircraft out of a 30-aircraft order placed in 2008. The airline also has 10 of the new Dreamliner aircraft on order with Boeing. 

The upgrading of Iraqi Airways’ fleet is a much-needed step, says Simon Elsegood, senior aviation analyst for the Middle East and North Africa at CAPA – Centre for Aviation, based in Sydney. “[Its] present heterogenous fleet mix of Airbus A320 family aircraft, older-generation 737s and a sprinkling of different wide-body types is not particularly sustainable, so getting the new fleet in place should be a priority for it,” he says.

Violence increases

Buoyed by a broadly improving security situation over the past few years, investor interest in Iraq has picked up. It is a long-term trend that bodes well for the development of airport projects. However, a recent increase in sectarian violence and continued political uncertainty could slow progress. Violence is now said to have reached its highest level in the past five years, partly due to the spillover of the Syrian conflict. So far this year, some 6,000 people have been killed in Iraq.

“The recent upsurge in sectarian violence in Iraq blemishes what was previously a continuously improving situation, and I can imagine that potential investors in the region are keeping a close eye on developments,” says Myers.

In early September, Mosul airport was unexpectedly closed for about 10 days, with all flights grounded for no obvious reason. According to Reuters, a security source said Prime Minister Nouri al-Maliki had ordered the shutdown. Al-Maliki has been in conflict with Mosul’s governor, Atheel al-Nujaifi, for a number of years over the latter’s support of protests by Iraq’s Sunni Muslims against his Shia-led government.

If the Sunni-Shia divisions become further entrenched and continue to infect internal politics, there is a risk Iraq’s aviation revival will stall.