Former CEO of Fraport Saudi Arabia and King Khaled International Airport
A NEW GATEWAY TO A CHANGING COUNTRY
Since 1983, the first scene greeting visitors to KSA has been a beehive-like concrete building blending a distinctly Islamic character with modern design. But now King Khalid International Airport is undergoing extensive refurbishment. Traffic at Saudi airports is currently in the region of 30 million passengers annually, but the General Authority of Civil Aviation (GACA) expects this figure to double over the next 10 years. As part of the overall reshaping of the country into an international tourist hub and a regional business centre, therefore, GACA is investing significant amounts in the project to upgrade and expand the country's airports by 2020. Private investors are set to contribute to the project too.
JUST THE BEGINNING
In 2007, GACA signed a 6-year contract with German airport management firm Fraport, to develop Jeddah and Riyadh airports.The first phase for Riyadh will provide for 25 million passengers between 5 to 8 years. The Saudi Arabian General Investment Authority (SAGIA) offered the German firm three options: setting up as a branch of the mother company; creating a joint venture with a Saudi partner, or working on a 100% foreign investment licence. “We chose the latter option and SAGIA has been very supportive,” explains Fraport Saudi Arabia's CEO Ralf Schiffer.
In 2010, GACA launched a tender to expand – and build a a commercial centre at - Jeddah airport and construct an entirely new airport for the holy city of Medina. At a cost estimated at SR 7 to 8 billion, the twin projects will increase the hajj traffic capacity to eight million passengers a year from the present three million. ''We offer a 25-year build, operate and transfer (BOT) contract for the development of a new airport in Medina,'' says a GACA spokesman.
THE WINGS OF FRAPORT
Established in a record eight months after winning the bid in 2007, Fraport Saudi Arabia for Airport Management and Development Services Ltd. is responsible for the expansion of both the King Abdulaziz International Airport in Jeddah and King Khalid International Airport in Riyadh. The company approaches the two projects differently, however. In Jeddah, a new terminal is being built which ultimately will accommodate 72 million passengers per year. In the first phase, to be inaugurated by 2013/2014, it have the capacity to receive 30 million passengers. In Riyadh, on the other hand, Fraport´s assignment is to manage the development of the 225 km² large area of the airport. “It will be the KSA's business card, as this is the main entry point to the country,” Schiffer says. The new terminal in Jeddah has been approved and building is underway.
Meanwhile Saudia Airlines, the state-owned airline that is the main hub operator out of Jeddah, is being prepared for privatisation by spinning off various of its operations into separate companies, allowing it to become competitive in a soon to be opened market. Lufthansa, Germany's national carrier, is one of the main consultants in this operation.
UNVEILING THE FIRST AIRPORT CITY OF THE WORLD
King Khaled International Airport is growing at a speed that outpaces all other airports in the region, at a solid 17% last year alone, so its expansion seems as obvious as necessary. But as usual, the Saudis are not about to take things on the way it is done everywhere else in the world, and so King Khaled International Airport will become the world's first 'airport aviation city'. The project will not only modernise the airport to international standards and transform it into a safe and secure commercialised airport environment catching up with local standards of the neighbouring countries. Says Schiffer: “His Royal Highness Prince Sultan bin Salman bin Abdul Aziz developed an innovative and unheard of concept. He didn't want just the usual businesses. He has put together a team working on this concept with Fraport.” And so, the airport is not only adding 24,000m² of retail area and extending its capacity to 46 million passengers. It will also add an industrial city with maintenance and repair facilities but also entire manufacturing plants for airplanes and helicopters – both Being and Airbus have already responded positively. “The area allocated for this segment alone is almost 80km². In total we have a tremendous 225 km² of land, providing endless opportunities for businesses of all kinds and an unbelievable employment and development project for Riyadh. Our ultimate aim is the full corporatisation of the airport,” Schiffer explains, who stresses that a project of this magnitude would be unthinkable without the support of the Commission for Tourism and Antiquities chaired by His Royal Highness Prince Sultan bin Salman bin Abdul Aziz, who also chairs the airport development project. “The support we receive from him day by day is amazing and a tremendous asset to us.”
Although no licences for new airlines are being granted, Schiffer plans to benefit greatly from the private aviation business which is skyrocketing in KSA but lacks proper maintenance facilities and protected parking space. “The planes' exteriors deteriorate heavily after a few weeks outside in the desert heat, which is very costly. So Saudi often keeps their planes in neighbouring countries' airports such as Cairo, Amman, UAE or even Europe.”
RE-ENTERING THE GULF QUOTA
Although in Schiffer's terms “the entire performance of the sector relies on airlines and especially on the national carriers”, KSA's own Saudi Arabian Airlines – commonly known as Saudia – has largely been overtaken by regional competitors such as Qatar Airways, Ettihad or Emirates Airlines, who seized the moment in the mid-nineties when conflicts in the region stopped Saudi Arabian and other domestic airlines from developing and renewing their fleet. Almost automatically, this promoted their respective home bases to better positions as regional and international hubs. The challenge for KSA is to regain the predominant position it used to hold in the region. “In fact,” says Schiffer, “KSA is the real big aviation market in the region. The country's GDP is 80% based on the local population while only a small part is added by foreigners, contrary to UAE and others where the ratio of national versus foreign input is the inverse. There is a lot of diversification going on in the development of the country, from industry to tourism and education, and airport development has kept pace with that trend.”
Today, there are two airlines in KSA: Saudi Airlines and NAS. “NAS is prosperous, developing well and expanding both domestically and internationally. They are planning to fly to Southern Europe soon,” Schiffer says. But foreign airlines generate as much international traffic as the Saudi airlines. International traffic in KSA grew by an impressive 18% in 2009. Some 50% of this international traffic comes from Europe, the USA, and Canada. The other 50% is contributed by Asia. “King Khaled International Airport is not yet a hub, but remains one of the biggest concentration points for foreign airlines in the region. Star Alliance, for example, flies seven connections per day to and from Europe and three connections with partners continuing to the East.”
However, to Schiffer, like to many entrepreneurs in the country, the real challenge facing the kingdom is to be found in changing the image it projects to the outside world, which is not that of a destination which is safe for tourism and business. Saudi Arabia’s tourism industry is unique in that has strong growth potential despite the limitations of strict visa regulations. “Western understanding and knowledge of KSA is woefully limited and almost entirely incorrect. People come here to work knowing nothing about the country and its real treasures. There is so much to do, see and enjoy here other than work. There is a lot more to be found here than I ever imagined, not least the warm-hearted, kind people. And professionally, of course, Saudi Arabia is a country full of investment opportunities. This country has an amazing future”.
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