GCC airports expanding on tourism boom hopes

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GCC countries are expanding their airports in anticipation of a tourism boom, according to a new report by Fitch Ratings.

This push to diversify their economies away from oil is expected to see the tourism sector’s contribution to GDP rise from $130 billion in 2023 to more than $340bn by 2030, exceeding 10 per cent of regional GDP.

Fitch sees the aviation industry playing a crucial role in this growth, with air passenger traffic projected to surge. A sample of GCC airports already shows significant increases compared to pre-pandemic levels, with traffic eight per cent higher than 2019 and 20pc higher than 2022. Infrastructure plans anticipate air traffic to double by 2030. In most of EMEA airports covered by Fitch, 2023 traffic was 97pc of 2019 levels.

The region boasts some of the world’s most modern airports, including Dubai International (UAE, 87 million passengers), Hamad International (Qatar, 45.9m), and King Abdulaziz International (Saudi Arabia, 42.9m). This existing infrastructure advantage is being further bolstered by expansion projects aimed at increased capacity to support the anticipated population growth and extra international visits, including pilgrim tourism.

GCC countries are increasingly adopting public-private partnerships (PPPs) for a wide range of infrastructure projects. Dubai authorities already announced a pipeline of social and transport PPPs ($10bn and about $1bn, respectively).

In 2023, Saudi Arabia unveiled a pipeline of 200 projects across 17 sectors, including four airports.

The recent procurement for Abha Airport attracted numerous expressions of interest from local and international investors as well as airport operators, including TAV Airports Holding.

The first PPP airport concession in the GCC was Medina Airport (in which TAV has a 26pc stake), which closed in 2012 with $1.2bn financing, led by local banks, to fund the expansion of the existing airport to accommodate growing passenger numbers.

By tapping into bond and sukuk markets, GCC countries would have access to a wider pool of investors and longer-term financing options, which could help to finance large projects.

Fitch’s EMEA airports are rated under the Transportation Infrastructure Rating Criteria, which will also apply for future projects in the GCC region. The firm’s current portfolio includes issuers with different debt structures, from corporate-like issuers with senior unsecured debt and looser covenants to others akin to project finance issuers or hybrids with strict covenants on individual assets, restrictions on additional debt and separation from other group activities.