Saudi Arabia's 2016 budget cuts could have a dampening effect on airport construction and airline travel in the country, analysts say.
But even with a sudden loss of altitude, the landing should be soft.
“For airport construction, you could consider building a grand palace instead of a majestic palace,” said Will Horton, a senior analyst at the Centre for Aviation (Capa). “But this is a long-term decision, not something easily adjusted for one year’s budget.”
Mr Horton said that even amid financial cuts, few airports in the region are designed with strict budgets in mind, as they are viewed as long-haul investments.
His stance was seconded by Mark Martin, the chief executive of Dubai-based Martin Consulting, who said that airports such as Jeddah, Taif and Medina would continue to attract passengers visiting for Haj and Umrah without signals of scaling back.
“Jeddah airport with the Mega Haj bin Laden Terminal in service at the moment is expected to soon reach maximum capacity, and as a result we don’t believe there will be any roll back on the development of the new Jeddah Airport,” said Mr Martin.
He said that in the end, the outlook depends on the oil price.
“This period will probably be the most significant for Saudi Arabia because the country’s biggest economic wealth driver has been devalued to its lowest level ever,” he said.
The decline in oil to an 11-year low last week of $35.98 – down from a high of about $115 per barrel in June last year – has hit the oil exporter hard.
The country has liquidated foreign assets held at the central bank and its sovereign wealth funds to plug the fiscal deficit.
Regardless, Arabian Gulf carriers such as Emirates have been bullish on Saudi Arabia lately. The Dubai carrier operates 70 flights a week to the kingdom – between Dubai and Riyadh, Jeddah, Dammam and Medina.
On December 15, it added a third daily flight to Riyadh in response to rising demand from business and leisure travellers.
Mr Horton said that any curb in Saudi Arabia’s government travel is likely to affect Saudi Airlines (Saudia).
However, he ruled out the possibility of government officials travelling in economy class, let alone low-cost carriers, as has happened in China amid austerity measures.
Meanwhile, Saudi Arabia’s economic situation gives more urgency for reform. Promoting aviation as an economic growth engine could be effective, as Saudi Arabia wants to increase non-oil revenues.
“The focus now shifts [for Saudi Arabia] to it building economic sustainability and, importantly in the coming years, balance its fiscal deficit by realigning its economic drivers,” said Mr Martin.
selgazzar@thenational.ae
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A new relationship with the old country
Treaty of Friendship between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates
The United kingdom of Great Britain and Northern Ireland and the United Arab Emirates; Considering that the United Arab Emirates has assumed full responsibility as a sovereign and independent State; Determined that the long-standing and traditional relations of close friendship and cooperation between their peoples shall continue; Desiring to give expression to this intention in the form of a Treaty Friendship; Have agreed as follows:
ARTICLE 1 The relations between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates shall be governed by a spirit of close friendship. In recognition of this, the Contracting Parties, conscious of their common interest in the peace and stability of the region, shall: (a) consult together on matters of mutual concern in time of need; (b) settle all their disputes by peaceful means in conformity with the provisions of the Charter of the United Nations.
ARTICLE 2 The Contracting Parties shall encourage education, scientific and cultural cooperation between the two States in accordance with arrangements to be agreed. Such arrangements shall cover among other things: (a) the promotion of mutual understanding of their respective cultures, civilisations and languages, the promotion of contacts among professional bodies, universities and cultural institutions; (c) the encouragement of technical, scientific and cultural exchanges.
ARTICLE 3 The Contracting Parties shall maintain the close relationship already existing between them in the field of trade and commerce. Representatives of the Contracting Parties shall meet from time to time to consider means by which such relations can be further developed and strengthened, including the possibility of concluding treaties or agreements on matters of mutual concern.
ARTICLE 4 This Treaty shall enter into force on today’s date and shall remain in force for a period of ten years. Unless twelve months before the expiry of the said period of ten years either Contracting Party shall have given notice to the other of its intention to terminate the Treaty, this Treaty shall remain in force thereafter until the expiry of twelve months from the date on which notice of such intention is given.
IN WITNESS WHEREOF the undersigned have signed this Treaty.
DONE in duplicate at Dubai the second day of December 1971AD, corresponding to the fifteenth day of Shawwal 1391H, in the English and Arabic languages, both texts being equally authoritative.
Signed
Geoffrey Arthur Sheikh Zayed