Focus on long-term growth

The investments in airport infrastructure are designed to enhance the Sultanate’s position as a transport and logistics centre for the region, and beyond.

As railways were at the core of economic development in 19th century Europe, many feel that air transport is central to growth in the modern era. Air links are key to ensuring that individual countries, regions and cities are integrated into an increasingly interconnected globalised economy. They are essential to trade, investment and tourism. As a country which has long been an outward-facing trading centre, Oman has put investments in its air infrastructure at the heart of its transport development strategy – and thus its long-term economic plans.

These investments in airport infrastructure are designed not only to take account of current levels of passenger and freight growth, but to stimulate that growth and enhance the Sultanate’s position as a transport and logistics centre for the region, and beyond.

The opening of Duqm Airport on the 44th anniversary of Renaissance Day is a landmark for the city’s development. Duqm is designed to become one of the region’s most important commercial and industrial centres, and a hub for trade between the Arabian peninsular and the rest of the world. The Special Economic Zone Al Duqm (SEZAD) covers an area of 1777 sq km and has 80km of coastline along the Arabian Sea. It is seen as central to Oman’s efforts to diversify its economy, make the Sultanate even more attractive for international investment and boost employment opportunities for nationals. SEZAD is expected to attract as much as $20bn in investment in the longer term.

The airport opened early, though it has yet to be fully completed, which gives an idea of how urgently the government feels additional capacity is needed to handle the growing volumes of passengers and cargo travelling to and from the city. Minister of Transport and Communications Ahmed bin Mohammed Al Futaisi has said that he expects the airport to enhance accessibility for investors and support the supply of spare parts and cargo to the Port of Duqm dry dock and the neighbouring oil field. Duqm’s 4kmn, $1.5bn dry dock is the second biggest in the Middle East, and is at the heart of the early phases of the city’s development.

Oman Air operates four flights per week from Duqm to Muscat; doubtless this frequency will increase as demand grows, while other airlines are also expected to fly to the airport in the future. It has a 4kmn runway considered the most modern in the country (upgrades at Muscat and Salalah have the same specifications), able to handle the world’s largest aircraft, including the Airbus A380.

In June, SEZAD’s Tender Committee awarded the contract for the third package of the airport’s development, including a 5700 sq m passenger terminal with capacity to handle 500,000 passengers a year, a central control building and an 8000 sq m cargo terminal with 25,000 tonne per year capacity.

Duqm’s development is important not only for the city and its surrounding area. It also plays a role in Oman’s broader integrated transport network, which aims to support local transport and boost domestic and international connectivity. This strategy involves large-scale investments in a range of transport modes, from road (such as the Batinah Highway, the backbone of transport north of Muscat), rail (the Oman Railway, which will eventually link into the wider GCC system), ports (such as Duqm, and the expansion of Sohar and Salalah) and of course airports. The Eighth Five Year Plan earmarks $6.1bn for aviation, a substantial part of the overall budget.

As well as enhancing speedy long-distance travel for passengers within Oman, airport development will help support tourism, another major plank of the country’s diversification strategy. Air access is also increasingly seen as vital for promoting international trade and investment. In my own country, the United Kingdom, there are serious concerns that lack of capacity at London’s main airport, Heathrow, is hampering the growth of flights to China, and thus limiting the scope for trade with what will soon be the world’s largest economy.

Naturally, central to this is the ongoing development of a new terminal at Muscat. The current airport is 40 years old and has limited capacity, while traffic continues to grow. Upwards of 8 million passengers a year pass through Muscat International Airport, while its capacity stands at 6 million. Passenger traffic grew seven per cent to 4.431 million in the first six months of the year, but double-digit growth has not been unknown in recent years. The $1.8bn new terminal will be able to handle 12m in the longer term, while a new runway will also increase capacity.

There have been some delays to the airport development, due partly to technical and supply chain issues, but it is moving ever closer to opening. Most businesses associated with the airport are taking the delay in their stride, while eagerly anticipating the expected boost in business when the new terminal opens.

The expanded airport will likely be central to catalysing growth in Oman – as well as making life easier for the passengers who fly through it. Cargo capacity will more than double to 250,000 tonnes per year, scalable to 500,000 tonnes.

What this means in practical terms is that Muscat will go from having capacity that barely copes with current levels of traffic to boasting an airport which can both accommodate further growth, and offer an attractive alternative to other regional centres for passenger transit and perhaps freight traffic, particularly in combination with the development of the Batinah Highway and, over the longer term, the Oman Railway. But the new terminal will also allow many companies currently transferring freight by road to use air – easing a constraint on cargo movement.

Airport officials expect that the new terminal will encourage Oman Air to expand its routes and fleet. They also hope that international airlines may look to Muscat as a transit centre in the Middle East, either transferring from other airports in the region, or those not currently present here choosing Muscat as a hub. The airport will offer not only greater capacity, but better technology than at present, again enhancing its competitiveness.

It is worth noting here that Oman Airports Management Company (OAMC) is aiming to use both local SMEs and major international players in the new terminal. This “best of both worlds” strategy means that jobs have been created for Omanis, and local businesses have been able to participate in this most international of investment projects, while OAMC has also been able to harness the expertise, brand strength and capital-raising powers of some of the world’s leading airport companies.

Staff numbers are expected to double when the new terminal opens, boosting local employment opportunities. Omanis are being trained in sector-specific skills around the world, including in Ireland, Germany and Korea.

Oman has also been pushing ahead with the development of several other regional airports, at Salalah, Sohar and Ras al Hadd. A new terminal at Salalah Airport should soon be open, part of a $1.5bn expansion project that will see its capacity expand from 500,000 to 1m passengers per year initially. Over the longer term, Salalah may be developed to handle up to 6m passengers annually, under a four-phase plan.

The growth of Salalah Airport is central to the economic development of the Dhofar region. Demand is strong: passenger numbers grew 16 per cent in the first half of the year, according to official statistics, having risen by 18 per cent in 2013. Oman Air already has an agreement with the Port of Salalah for freight handling that boosts intermodality, The airline also hopes that the agreement can support increasing European freight traffic.

Salalah has a major role to play in Oman’s tourism sector, as the entry point for Dhofar’s Khareef festival, an event which differentiates the Sultanate’s touristic offering, with the capacity to draw tourists interested in more than sun, sea and sand. The festival attracted 170 per cent more visitors this year than last, over 200,000, nearly 60,000 of them flying in.

Oman’s plans for transport development are by their nature long-term. Beyond ensuring that airport infrastructure keeps pace with (and in some cases catches up with) current demand, they should reinforce the Sultanate’s competitive advantages as a centre for trade and investment, as well as improving accessibility for tourism. They may take some time to bear fruit, but, integrated into a wider national and regional transport system and the country’s broader economic development path, they will be an important support and catalyst for growth over the longer term.

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