Airport privatisation finds favour
The Kingdom of Saudi Arabia's aviation sector is a dynamic industry due to the country's expanding population and increasing religious tourism.The KSA Government is working to streamline the industry through infrastructure development, privatisation initi
Keeping up with the growing need, the KSA has just opened the first phase of its airport expansion project. The $1.2 billion expansion plans consist of a three-level terminal covering over 156,940 square metres with 16 aircraft stands and boarding bridges.
Frost & Sullivan estimates that the KSA receives close to 11 million tourists annually of which 5.7 million are aviation passengers. Aviation traffic is likely to grow at a Compound Annual Growth Rate (CAGR) of 27.2 per cent over the next decade or so. In view of this, the airport expansion project assumes special significance. The new airport is expected to significantly boost Madinah's economy.
"Privatisation is seen as a welcome move as it provides a more competitive environment for airports to function. Besides improving efficiency, privatisation ensures that the airport management will have a more focused business outlook that could contribute to the economy of the KSA," says Vinod Cartic, Senior Consultant, Business and Financial Services, Frost & Sullivan. "Growth is also more likely in the privatisation setup with airports looking to non-aeronautical revenue sources as well."
The Madinah airport project was constructed and will now be operated as a private enterprise.The KSA has been steadily moving towards aviation privatisation and the sale of Saudi Airlines was the first of multiple such steps.
With the need to support an entire business environment, airports have more varied source of revenue, leading to diversification. "Given that airport revenue is tied to economic cycles and uncertainties, diversified sources of revenue can help stabilise the airport's cash flow. Studies indicate that as airports mature in terms of traffic, non-aeronautical revenue increases correspondingly," adds Cartic.
The Madinah airport could also pave the way for a Madinah Aerotropolis, an urban planning concept where all economic and business activity revolves around the airport.