Another huge airport coming in Riyadh, Saudi Arabia – living up to the hype

Posted 16/12/2024 05:01

Air transportation in the Middle East has been developing rapidly and the Gulf area has become the epicentre of activity, its main airports being leaders in facilitating one-change travel globally, while aiding the brisk development of tourism at home.

Saudi Arabia tends to be overlooked, but is making great strides to improve its domestic air network. Even more so its international one, which it has so far done partly through co-operation with the private sector.

The country already has some of the biggest and most expensive airports under its belt.

Now it looks set to get another one: the King Salman airport at Riyadh, one that will be built around the existing King Khalid Airport, and an essential part of Crown Prince Mohammed bin Salman's 'Vision 2030'.

It is a giant project, costing close to USD30 billion, but there are warning signs about overdevelopment, both at home and abroad.

In Saudi Arabia the country is at a crossroads as it adapts to the paradigm of a world with less reliance on oil, while the US looks set to gain the ascendancy in that field, and while it reassesses its relationship with Iran.

Internationally, in the UAE, the Dubai World Central (Al Maktoum) Airport already stands as a memorial to overestimation of demand - no airport in the world is going to be handling over 200 million passengers a year anytime soon, and such an operation would simply be too big anyway.

While King Salman airport is on a smaller scale, it is still vast, and the Saudi authorities need to be absolutely certain that the planned growth will be sustained.

If there is to be any private sector participation they will definitely need to be convinced of that.

Summary

Saudi Arabia seeks greatly improved domestic and international air connectivity.
One of the world’s biggest and costliest airports is to be built at Riyadh.
There has been relentless passenger growth at the existing airport.
50mppa are anticipated by 2030, but the new facility will be built for 100mppa.
Riyadh has some way to go to become a ‘top global city’ economically, which is the target.
Population and tourism growth support the philosophy behind this new facility.
Getting into the country is much easier than it was.
Saudi Arabia’s new cities fall into ‘line’, but the main one is being scaled back, and who will live in them?
The NEOM tourist development is considered the world's most ambitious tourism project and a new supporting airport is under construction.
Dubai World Central growth hiatus stands as a warning.
The option to reassess demand remains.
BRICS membership for Saudi Arabia has been sidelined.
The private sector needs certainty, not speculation.

Saudi Arabia seeks greatly improved domestic and international air connectivity

Saudi Arabia has a plethora of airports for its population size, but surface transport across the large country can be difficult, and rail transport (while much improved) cannot be a replacement for air travel in the way anticipated in Europe, for example.

Moreover, there is a belief that the country is not sufficiently connected to the rest of the world, most travellers having to fly to competitive hubs to reach Saudi Arabia.

Earlier this year the 'Future Aviation Forum' in Riyadh set out its stall to attract investments of over USD100 billion towards the national aviation sector.

More than USD50 billion was earmarked for the development of Saudi airports, while airlines are expected to place aircraft orders valued at USD40 billion. The remaining USD10 billion will be distributed among other aviation related projects, including USD5 billion dedicated to special logistics zones within the major airports of Riyadh, Jeddah, and Dammam.

One of the world's biggest and costliest airports to be built at Riyadh

Now Saudi Arabia will open what is being billed as one of the world's physically largest airports - King Salman International - in Riyadh by 2030, forming a crucial part of Crown Prince Mohammed bin Salman's 'Vision 2030'.

The international companies Foster + Partners, Jacobs, and Mace, along with the Saudi company Nera, have already been signed up to design and build it.

Coming in at USD29 billion, it will be the one of world's costliest airport projects too. Along with the extension of Dubai World Central (Al Maktoum International Airport) in the UAE; the now mostly completed expansion of Hong Kong International Airport including the third runway; the Long Thanh Airport in Vietnam - a greenfield project; and the expansion of Jeddah's King Abdulaziz International Airport - also in Saudi Arabia.

The Asia Pacific region is the world's most populous, and the fact that three of these five projects are in the relatively lightly populated Middle East, rather than there, is testament to the continuing ambition already inherent in that region.

And the further fact that two of them are in a single country - Saudi Arabia - hints at it being one that has set its stall out to be a global powerhouse where air transport is concerned.

King Salman will have six runways. It will cover 57sqkm (22 square miles) in area, and include 12sqkm of retail space, which will easily make it the world's largest shopping mall. (The largest one currently is in Iran, at just 1.95sqkm, and not at an airport).

But it will be nowhere like the world's biggest airport.

That claim lies with King Fahd International, near Damman in Saudi Arabia (no surprise there), which is the size of New York and bigger than neighbouring Bahrain, at a staggering 776sqkm (300 square miles).

Other very large facilities include: Denver International (the last new primary level airport to be built in the US) at 136sqkm; Atlanta (78sqkm); Istanbul (76.5sqkm) and Dallas-Fort Worth (69.63sqkm).

Putting down a marker in the sand

So King Salman will be a comparative minnow, but it isn't so much about size as about ambition, and laying down a marker in the sand (literally in this case).

King Salman isn't a new airport per se either, as it will incorporate the existing King Khalid Airport's terminals. So the latter is being 'built over' it, in a similar way to the way that Berlin Brandenburg was built over Schoenefeld, for example.

King Khalid opened in 1983. The total project is expected to create 150,000 jobs across all categories: direct, indirect and implied, although it is not known if that includes construction jobs.

Relentless passenger growth at the existing airport

In 2023 King Khalid handled 31.7 million passengers - 18% more than in the previous year, and 9% more than in 2019. Its growth has been relentless since 2009, as demonstrated in the chart below.

Riyadh King Khalid International Airport: annual traffic, passenger numbers/growth, 2009 - 2023

Source: CAPA - Centre for Aviation and Saudi Arabian General Authority of Civil Aviation (GACA).

Anticipated that there will be 50mppa by 2030, but new facility will be built for 100mppa

There are six years between 2024 and 2030 when King Salman is scheduled to open. In the six years from 2014 to 2019 passenger numbers increased by 45%.

Assuming the airport grows at 10% in 2024, and applying the same 2014-2019 growth level to the period 2024 to 2030 when the new airport is scheduled to open, there would be just over 50 million passengers in that year, 2030.

But King Salman is intended to be able to handle 100mppa from its opening day, which is the amount of traffic that the Saudi Arabia General Authority of Civil Aviation (GACA) anticipates for King Khalid by that date, and with plans to reach 185 million by 2050, supporting Riyadh's goal to become a top global city by 2030.

The ambition is uncontained.

Riyadh has some way to go to become a 'top global city'

The UK's Loughborough University has published the 2024 iteration of its database 'The World According to GaWC' which seeks to establish a city's network connectivity - that measures its integration into the world city network, primarily from an economic viewpoint.

It classifies cities from 'Alpha ++' (there are only two, London and New York), in 10 categories down to Gamma.

Riyadh is located today in the fourth category, 'Alpha -', along with cities such as Zurich, San Francisco and Taipei.

There is only one other Middle East city in the four Alpha categories - Dubai, which ranks as 'Alpha +'.

Riyadh was a 'Beta -' city until 2016, when it jumped two categories to get to 'Alpha -'. Since then it hasn't moved, through four further database iterations.

Perhaps the new airport will elevate it further, but it still has a long way to go to be a 'top global city', which is a claim that is reserved for the top two GaWC categories, comprising just 10 cities.

Population and tourism growth support the philosophy behind this new facility

There are two definable drivers behind this development.

The first is the Saudi government's desire to support the growth of Riyadh's population to 15-20 million people by 2030, and the economic impact that would have. The 2024 population is estimated at 7,820,550 so the authorities have tasked themselves with at least doubling it in six years. At present (2023 - 2024) it is growing at 2% per annum.

And that is even before the new airport will open, but population growth is at least partially governed by the prospect of greater levels of mobility and connectivity. That growth should help transform Riyadh into one of the top ten city economies globally (the two top GaWC categories) - or at least point it in that direction.

The other driver is Saudi Arabia's vision to boost tourism, a desire that is difficult to comprehend, given its propensity until this decade to keep people out unless they were travelling in authorised groups, like in North Korea.

Getting in is much easier than it was

Actually, the decision to open up the country to independent visitors and to relax entry requirements can be traced back to the mid-2010s, and quite quickly many western countries' nationals found themselves to be qualified for an (expensive) e-Visa, rather than having to go through a more formal and lengthy application process.

Then the marketing of the tourism growth project was put on the back burner for a while, along with the privatisation programme for airports. (That privatisation process has since been reinstated).

Even so, Saudi Arabia recorded a total of 20 million tourists in 2019, ranking 13th in the world in absolute terms.

With 0.56 tourists per resident, Saudi Arabia ranked 61st in the world, and many of those visitors are primarily for religious purposes. In that year the country generated around USD6 billion in the tourism sector. This corresponds to 0.72% of its gross domestic product and approximately 8% of all international tourism receipts in the region.

Those figures were considered likely to grow considerably with the continuing and rapid development of tourism projects, but as in most other countries - tourism fell foul of the COVID-19 pandemic.

Numbers began to pick up again in 2022, and according to the Ministry of Tourism they reached 27.4 million in 2023.

Saudi Arabia: annual tourism, visitor arrivals/growth, 2015 to 2023

Source: CAPA - Centre for Aviation and Saudi Arabia Ministry of Tourism.

What did not stop during the COVID-19 pandemic were the long term grand projects to create new cities and associated tourism attractions.

Saudi Arabia's new cities fall into line, but who will live in them?

The best known new city in Saudi Arabia is 'THE LINE'.

This is a conceptual linear smart city in Neom, Tabuk Province, which will cost up to USD320 billion (some estimates go to USD1 trillion), housed in a single building designed to have no cars, streets or carbon emissions. It will eventually span 170 kilometres (110 miles) at a height of 500 metres (1,600ft) and a width of 200 metres (660ft,) and will be sized to accommodate a population of nine million, or about 25% of the total.

That would mean an average population density of 260,000 per sqkm (670,000/sq mile). By comparison Manila, the world's most densely populated city in 2020, had a density of 44,000 per sqkm (110,000/sq mile).

Exactly who is going to live there, in something that could be out of the film Blade Runner (the sequel to which was set in 2049 which is when THE LINE should be completed) - remains to be seen.

THE LINE is being financed to the tune of 50% by Saudi Arabia's sovereign wealth fund, the Public Investment Fund (PIF), which is attempting to buy into London Heathrow Airport (and owns Newcastle United Football Club in the UK). It has assets under management amounting to USD600 billion.

And it is shrinking already

In Apr-2024 the project was scaled back as a result of restrictions over funding by the PIF, with anticipated 2030 completion of a 2.4 kilometres (1.5 mile) section of the city that would contain fewer than 300,000 residents (down from an expected 1.5 million).

That 2030 completion date is not allied directly to the King Salman Airport project, which is 1,400km away.

NEOM development is considered world's most ambitious tourism project, and a new supporting airport is under construction

What is allied to THE LINE is NEOM, flagged as "the world's most ambitious tourism project", one that "will challenge and shape the possibilities of global travel in the years to come…a new model for measurably regenerative tourism". THE LINE is part of the wider NEOM project, which will cost USD500 billion.

The existing Neom Bay Airport is located at the crossroads of three continents, connecting Saudi Arabia, Jordan, and Egypt. The airport is strategically important because it can bring 40% of the world's population to Neom within six hours. The first flight to Neom Bay Airport was in Jun-2019.

The airport is expected to have a capacity of 100 million passengers per year eventually, but right now it has precious few flights - mainly domestic, but also to Doha, Dubai, Cairo, Istanbul and London Heathrow.

No passenger statistics are available after 2021, when there were 6,500 passengers, but seat capacity in 2024 is known - almost 500,000 seats.

It goes without saying that a new, two-terminal, two-runway airport is under construction, with an anticipated capacity of 20mppa again by 2030.

Neom Airlines, which should start operations shortly, will be based there.

Questions are being asked about THE LINE

Questions are starting to be asked about THE LINE, which is regarded in some quarters as a visionary but flawed concept, urban planners say. While the concept of linear urban design has existed since the 19th century, few have actually attempted it.

And that does also raise questions about all these grand airport projects, including the new NEOM airport. And whether the passenger numbers will be attainable, and the buildings sustainable economically.

Dubai World Central's growth hiatus stands as a warning

There has been a proliferation of new airport terminals in the Middle East in the past few years, together with some tentative plans for others, and for new airports (Kuwait, Bahrain, Sharjah etc.).

The most striking example of dramatic airport expansion is the resurrected development of Dubai World Central (DWC). But it won't be fully operational for another 10 years, which will be a quarter of a century after it first opened.

What drove the authorities there finally to make this decision was partly the floods experienced earlier this year, which closed the Dubai International (DXB) airport down, and partly the fact that DXB is getting close to being 'maxed out' on its two runways now - never mind the disruption that occurs when one of them is closed for maintenance.

There are lessons to be learned that apply to the King Salman project.

DWC's highest ever recorded annual passenger figure to date is just 0.6% of what it was designed for, and that is a situation brought about by a combination of the world's ills during the past decade. And in 2023, when almost all the world's airports were recording higher numbers again, DWC didn't, slumping by 17% compared to 2022.

It was a project that was hyped up, grew far too fast, had to be virtually abandoned, and then again resurrected at greater cost than the original figure, which was already high.

The option to reassess demand remains

No doubt GACA would love to see the capital's new airport succeed, and even to put Dubai in its place, but even at this stage there is still an opportunity to consider an alternative phased increase in capacity at Riyadh, instead of a full-blown replacement airport that caters to a demand that can so easily be influenced by outside events.

No one, for example, knows exactly what will happen with oil production now. The new president of the United States could probably mean far less emphasis on green, non-carbon energy, but at the same time he may not look kindly on the improving relations between Saudi Arabia and Iran - the US and Iran being two countries that have historically been at loggerheads.

Saudi Arabia might be the world's second largest oil producer, at 11 million barrels a day, but it is far behind the US (22 million). (Iran comes in at #9, with four million).

Mr Trump's stated objective is to "drill, drill, drill", and it's possible that once a supply/demand equilibrium (that brings down local heating and petrol costs) has been achieved domestically, the US government will be at liberty to increase sales abroad at the expense of the OPEC countries (the US is already a net exporter of oil).

That spells trouble ahead for Saudi Arabia, without any of the other factors and Black Swans that can sharply influence both tourism and oil prices - oil production being an industry that tourism is intended, long term, to replace there.

BRICS membership has been sidelined

Saudi Arabia was hoping to see benefits arising from its membership of the expanded BRICS block, it having been invited to join in 2023 along with five other countries. But it did not take up the offer on 01-Jan-2024 and has sat on it ever since.

The reasons are not clear, but may be connected to the invitation also handed to Iran, which did take it up, along with the UAE. Another factor, though, might be the way that the expanded BRICS was increasingly distancing itself from The West.

Saudi Arabia is reassessing its relationship with other parts of the world, and that is a primary reason why airport expansion at this level needs to be examined cautiously. While there will always be an influx of visitors on account of religious festivals at Mecca, for example, other flows might vary; or even dry up.

The fact that the size and scope of THE LINE is already coming under scrutiny and could be resized downwards considerably, and that Dubai has not yet come close to the number of passengers it was expecting by this time, is evidence alone of the need to replace hype with realism and the certainty of infrastructure that matches known growth parameters.

The private sector needs certainty, not speculation

And it is most certainly the case that foreign companies that are invited to participate in these projects, through PPP or BOT schemes, will seek such certainties.

Saudi Arabia kick-started its airport privatisation programme again at the beginning of 2024 with two small airports (see Saudi airport PPPs - government plans USD1 billion programme for two small airports, more to come), and in mid-Oct-2024 a further four airports were confirmed for privatisation, with the intriguing rider that "support will be required to accommodate demand and transition to clean energy".

Some of the larger airports have figured in that process in the past, and they will do again.