Dubai International Airport faces congestion problems. Courtesy Dubai Airports
Dubai International Airport faces congestion problems. Courtesy Dubai Airports

Dubai International outgrowing itself faster than expected



Rampant passenger growth through Dubai International Airport (DIA) could create congestion problems within three years, according to the chief of Emirates Airline.

That is because passenger growth of 14 per cent is outpacing earlier projections.

It could also hasten plans to move operations to the new Dubai World Central hub.

“At the moment we have issues. Already DWC (Dubai World Central) is being used, during the runway shutdown period, but if you look at the April figures [for Dubai International] they are up 14 per cent again,” said Tim Clark, the president of Emirates.

“When we did our planning for Dubai International Airport, we worked on growth of 10-11 per cent, but we have been running 14-16 per cent steady for the last two to three years,” he added.

Mr Clark said that DIA would run into congestion problems by 2017-18, and an action plan was needed now.

“We need to push more into the existing DWC and try to expand the passenger terminal building now to take some of the spill from DIA,” said Mr Clark.

Arabian Gulf hubs including Dubai, Abu Dhabi and Doha are investing billions of dollars in adding capacity to existing airports and building new terminals to cope with double-digit passenger growth as they expand their global networks.

“There is nowhere else that you can go around it,” said Mr Clark on the sidelines of the annual general meeting of the International Air Transport Association [Iata] in Doha. “I suggest getting DWC cracked on as quickly as possible.”

DIA recorded 6.15 million passengers in April, down slightly from March but up 13.7 per cent year-on-year.

Traffic rose 11.9 per cent to 24.5 million passengers during the first four months of this year, up from 21.9 million in the same period last year.

Regionally, the highest growth in passenger numbers was from western Europe in April. That was followed by the Indian subcontinent, driven by growth in passenger traffic from the Pakistani cities of Karachi and Islamabad.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia