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Does the region have too much air cargo capacity? Nowhere near enough if planned airport developments are anything to go by.

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By  David Ingham Published  October 7, 2006

Does the region have too much air cargo capacity? Nowhere near enough if planned airport developments are anything to go by.

Headline figures tell a stunning story of how much money will be spent on airport development projects in the GCC in the next ten years. Around US $40 billion has currently been earmarked for airport development across the Middle East, with air cargo getting its share of this massive budget.

Amongst the key projects underway or planned in the region are the US $8.1 billion Dubai World Central; the US $4.1 billion Dubai International Airport expansion; the US $6.8 billion expansion of Abu Dhabi International Airport and the brand new US $5.5 billion Doha International Airport.

Potentially the largest project in the region is Dubai World Central, which will incorporate an airport, freehold property developments and an air cargo & logistics hub called Dubai Logistics City (DLC). The project will develop in stages, as demand dictates, but the current blueprint allows potential cargo throughput of 12 million tonnes annually in 16 air cargo terminals. To put that in perspective, Memphis International Airport handled 3,636,661 million tonnes of cargo in the 12 months to June 2006.

Dubai World Central’s airport will have up to six runways, the first of which is an all-weather, 4.5 kilometre runway, being built to CAT 3 classification. In addition to serving cargo airlines, the airport has a potential maximum capacity of 120 million passengers annually. Michael Proffitt, CEO of Dubai Logistics City, says: “I’m not sure there will be another project of this scale and size.”

The choice of 140 km² in Jebel Ali as the site for Dubai World Central is no coincidence. Just across the road lies Jebel Ali port and free zone, which will be connected to DLC and the rest of Dubai World Central by road bridges, creating one continuous, customs-free area.

Goods that come into Jebel Ali, the world’s ninth largest port, by ship could be unloaded, driven across to DLC, and put in a plane for transportation to other parts of the world. Products coming into DLC by plane could also be unloaded, driven across to Jebel Ali port and loaded into a ship for re-export to the surrounding region.

The construction of a dedicated road from Dubai International Airport to Dubai World Central will bring the existing central airport into that customs-free area. There is even talk of a GCC rail system, with a major terminal in Dubai World Central or Jebel Ali Free Zone, being built in the future.

It is this integration of sea, road, air and possibly rail, known in the industry as ‘multi-modal logistics’, that makes DLC such a strong proposition, according to Proffitt. “It is truly unique to have the port and airport so close together in an integrated customs area,” he says.

The development of Dubai World Central and Dubai Logistics City has inevitably raised speculation about the future of Dubai International Airport. The future, it would seem, is as bright as ever.

Rather than refocusing primarily on passenger traffic and allowing Dubai World Central to take over as Dubai’s cargo hub, Dubai International will continue to ramp up its cargo handling capabilities.

The existing Dubai Cargo Village is bursting at the seams and cargo throughput continues to grow at an average of 15% annually. In the first six months of 2006, the Village saw throughput of 690,775 tonnes of cargo, compared with 627,704 tonnes in the first half of 2005. Management expects annual throughput to cross two million tonnes by 2010.

In anticipation of this continued growth, expansion projects are already underway. At a cost of AED 1 billion, the first stage of what is known as the Dubai Cargo Mega Terminal is under construction.

Components of the project include Hall B Express Mail Centre, the Cargo Mega Terminal 1, administrative and agent facilities, a multi-storey car park, elevated roadways and a central utility plant. The Cargo Mega Terminal 1, expected to be complete by the end of 2007, should add another 1.2 million tonnes to the facility’s annual cargo handling capacity.

The terminal will be used by Emirates SkyCargo. The five-storey structure, which will house offices and warehouses, will be connected by an air-conditioned walkway to a multi-storey car park that will accommodate 650 vehicles. “The phased expansion will allow us to offer the efficient services we are recognised for internationally, even while the volume of cargo will continue to grow every year,” says Ali Al Jallaf, director, Dubai Cargo Village.

The Dubai Cargo Mega Terminal should be able to handle an estimated 4 million tonnes of freight annually by 2018.

Over in Qatar, a spanking new airport is taking shape at a reported cost of US $2 billion just in phase one. Half of the new Doha International Airport’s land mass will be reclaimed from the sea and the airport will have two parallel runways.

In phase one alone, an aircraft maintenance centre will be created with hangars that can accommodate two A380s and three A340s at any one time. A cargo facility will be built with capacity of 750,000 tonnes per annum and eight hardstand aircraft parking bays. There will also be a courier and mail facility and a free trade zone and business park. “The new airport will position Doha and Qatar as a leading regional aviation hub for at least the next 50 years,” said Akbar Al Baker, CEO of Doha International Airport.

Plans are also underway to boost warehousing and air cargo capacity in Saudi Arabia. The Saudi Arabia General Investment Authority (SAGIA) is promoting a warehousing and logistics project in Prince Abdul Aziz Bin Mousaed Economic City, located in the North of the country. The project has already attracted a group of regional investors, including Gulf Finance House, Abu Dhabi Investment House, Tanmiyat Group and PWC Logistics.

“The value proposition of the Prince Abdul Aziz Bin Mousaed Economic City centres around the development of a comprehensive transportation and logistics hub to take advantage of the region’s unique core strengths,” explains Esam Janahi, chief executive officer of Gulf Finance House. “Projects such as this create a rare niche for a diverse range of private sector investment opportunities.”

Covering an area of over 150 million square metres, the Prince Abdul Aziz Bin Mousaed Economic City will include an international airport, which is expected to handle 3 million passengers per year, while a railway station will handle an additional 2 million passengers annually. The project also includes dry ports and operation centres, which will be capable of handling over 1.5 million tonnes of cargo every year.

Promoters of the project hope a location in Northern Central Saudi Arabia and proximity to an airport and rail links will make the development attractive to air freight firms. “Located in the heart of the Kingdom, Hail is equidistant from Jeddah, Riyadh and the Eastern province, and provides the perfect northern gateway to the Kingdom, linking a number of key trade routes,” says Sheikh Sleiman Bin Abdul Aziz Al Majed, chairman of Tanmiyat Group.

“It can be accessed by 12 Arab capitals in only one hour by plane. We are sure this would immensely add to the attractiveness of the project and enhance both shareholder value and returns.”

Some logistics experts have questioned certain aspects of the project, such as location and incentives. “For instance, is Hail really the best city to accommodate a logistics hub? The necessary infrastructure is currently unavailable and could take fifteen years to develop,” says Syed Mustafa, the vice president of logistics at Saudi-based Al Majdouie Group.

“In addition, the nearest seaport is either Jeddah or Dammam, which is some distance away. If companies can transport their cargo directly from Dammam to Dubai, would they really consider taking the consignments via Hail? Could the additional cost be justified?” he adds.

Abu Dhabi International Airport is also ramping up capacity, in large part because of the growth of Etihad Airways. Etihad Crystal Cargo, the carrier’s air freight subsidiary, aims to carry 150,000 tonnes of cargo in 2005 and increase the figure to 200,000 in 2006.

The Airport opened a new second terminal in August 2005, which is capable of handling up to two million passengers annually. There are further plans to build a new terminal and double the airport’s land area to 34 km². The expansion includes the addition of new cargo facilities that will have ultimate handling capacity of around two million tonnes of freight a year. Close to the new cargo facilities, land has been allocated for related commercial activities, including a free trade zone.

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