Is there a real case for an international airport at Ajman?

A new international airport will serve the emirate of Ajman in the UAE from 2019. Keith Mwanalushi discusses the business case for the new gateway with John Grant, senior analyst at air travel intelligence specialist, OAG.

Ajman International Airport is a planned construction project for the smallest of the UAE’s seven emirates.
Back in 2007, the Government of Ajman granted the White Lake Consortium the sole concession to design, build and operate the airport.
The first phase of the project will reportedly consist of terminal buildings for arrivals and departures, runways, a cargo complex, aviation school, maintenance workshops, free zone and a commercial area. The plan is to have a capacity of one million passengers a year rising to 10.4 million passengers by 2046.
New airport developments are frequently expensive, aspirational and linked to national ambition. With few exceptions, they are also difficult to develop, compete against established operations and, sadly, often fail to deliver against the initial business plans. Against such backdrop, the planned Ajman International Airport development would appear to face numerous challenges in the coming years.
Ajman is just 12 kilometres from Sharjah Airport, the major base for Air Arabia and from where some 19 airlines will operate more than 35,500 scheduled flights in 2017. And, of course, the current Dubai International Airport is a further 15 kilometres away with its giant hub operation, with some 81 scheduled passenger airlines and 199,000 scheduled flights this year.
In global mega hubs such as New York, London, Los Angeles, Paris and Chicago, cases for additional capacity have been based on expansion at existing airports rather than a new competing airport facility. So, it begs an honest question, is there really a business case for Ajman International Airport and, if yes, then how can the chances of success be maximised?
White Lake Consortium did not respond when asked for an interview but John Grant, senior analyst at air travel intelligence company, OAG, weighed in on the key issues.
“Firstly, the proposed new airport needs to be placed in context,” he said, pointing out that an initial development capable of supporting a million passengers per annum represented a small fraction of the existing passenger throughput at neighbouring Dubai International and Sharjah (96 million).
“Assuming a modest level of growth when the new Ajman Airport opens in 2019 – that demand will be closer to 105 million – so capturing less than a 1% share of the market over time isn’t, perhaps, that challenging of a task.”
Rationalising the numbers and market share seems easy but securing the necessary traffic at a new airport can be totally different matter.
The plan envisions a modern, state-of-the-art airport to provide increased air transport links across the UAE that will become the home at a new base-carrier airline. The project also extends into the surrounding area to deliver an infrastructure that supports the vision for Ajman’s on-going regional development.
Grant believes that, while the masterplan includes the creation of a locally based airline which, while sensible and easier to factor into the project, it heightens the overall investment risk.
“Any new airline will compete in the low-cost sector, attempting to grab market share from surrounding carriers and airports and, therefore, the network design is likely to replicate the major volume markets currently served by Air Arabia and Flydubai,” he suggested.
Data from OAG shows that the top 10 low-cost markets from both Dubai and Sharjah are likely to include many of the launch destinations for any new airline operating from Ajman.
From a planning and aircraft utilisation perspective, all the largest low-cost-carrier (LCC) markets are within a three-and-a-half-hour sector length, which, with some judicious planning, should allow for high productivity on each aircraft.
For a new, locally based airline with an initial fleet of three or four single-aisle, new generation aircraft, with sufficient creativity around product offering and some ability to develop customer loyalty, there is the possibility of building some reasonable volumes.
Each aircraft, operating three round trips a day with typical LCC load factors, would generate the initial objective of one million passengers a year, once fully established.
However, four locally based passenger aircraft averaging three rotations a day will hardly mark the newly laid asphalt, so Grant feels securing other services will be crucial.
“Certainly, generating new services from overseas carriers will be challenging. The inbound market attraction appears limited and, while the airport developers suggest that they have received letters of interest from 25 airlines for landing rights, those letters are merely expressions of interest rather than planned schedules and services.”
The opportunity for the new airport appears to centre on the planned move of Emirates to the Al Maktoum International Airport, which will occur before 2025. “If the current Dubai airport (DXB) ceases operation at that time, then inbound airlines will face a choice of relocating to Al Maktoum, Sharjah or, perhaps, Ajman International,” said Grant. “For most airlines currently operating to Dubai International, moving to the new Al Maktoum Airport will be an inevitable development. Once Emirates moves, everyone will follow. But there is a small cluster of airlines that may provide an opportunity for Ajman.”
OAG data also indicates there are currently 25 overseas airlines that operate to both Dubai International and Abu Dhabi Airports. Of those 25, eight already operate to both Dubai and Sharjah, although in all cases with a much-reduced programme from Sharjah. Those eight carriers may represent an opportunity for services to the new airport at Ajman, since they have already been managing a two-airport approach to the local market, although they would certainly require considerable incentives to support such a move.
Grant suggested, perhaps the larger market opportunity for the airport lies in the cargo sector, which certainly has greater flexibility in terms of airport usage, but equally, requires a specialist infrastructure and operating platform to succeed. Cargo demand frequently reflects global economic trade and confidence levels and, in recent years, has been inconsistent to say the least in its growth rates.
The latest forecast from Airbus suggests that market sentiment is currently positive and that the cargo market is expected to double in the next 20 years in line with global trade.
For Ajman, the cargo market represents a key opportunity given the demand for high-value perishables and other consumer products that are imported into the region. “With a link to the local free trade zone, securing 70% of the airport’s commercial activity from cargo-related businesses is possible,” Grant believed.
With less than 18 months until the planned opening of the new airport, the clock is ticking faster as each day passes. “Airlines, freight forwarders and the wider supply chains associated with airports, will start looking forward towards 2019 in the next few months, by which time, Ajman International needs to have built a very credible story for presentation to the industry. While development and planning continues, the current absence of any marketing material or awareness-building activity is something that needs to be addressed very quickly,” Grant advised.
There are clearly lots of ‘ifs’ around the potential development of the new airport at Ajman –and some factors appear to be very changeable with others outside of direct control. There is a scenario whereby a new, small airport with a focus on cargo and some LCC passenger operations could be developed... but the key question for the investors is at what price and with what return?

    Low-Cost airline capacity from Dubai and Sharjah, summer 2017

From Dubai

Scheduled LCC Capacity Summer 2017

From Sharjah

Scheduled LCC Capacity Summer 2017

Kuwait

296,718

Trivandrum

132,516

Jeddah

220,552

Kozhikode

121,644

Muscat

222,729

Kochi

118,854

Delhi

225,525

Muscat

117,096

Riyadh

205,732

Damman

114,744

Bahrain

196,686

Mumbai

113,088

Mumbai

186,465

Dhaka

111,720

Kochi

157,224

Kuwait

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