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REPORT: Impact of Saudi's Madinah Airport expansion

The Kingdom is currently implementing various changes through infrastructure development, privatisation initiatives, and market liberalisation.
A Saudia Airlines plane.
A Saudia Airlines plane.

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A new report by consultants Frost & Sullivan shines a light on the the Kingdom of Saudi Arabia’s growing aviation sector, which the company says is benefitting from Saudi's expanding population and increasing religious tourism.

The Kingdom is currently implementing various changes through infrastructure development, privatisation initiatives, and market liberalisation.

The recently opened first phase of the Madinah airport expansion project – a $1.2 billion expansion plan consising of a three-level terminal covering more than156,940 square metres with 16 aircraft stands and boarding bridges – is expected to significantly boost Madinah’s economy.

For Haj and Umrah pilgrims who are looking to sanctify their travel with a visit to Madinah, the airport expansion plan is a boon. Frost & Sullivan estimates that Saudi Arabia welcomes 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% over the next decade, therefore the airport expansion project assumes special significance and could boost commercial trade to more than $107 million, create almost 20,000 job opportunities and require the construction of housing for at least 100,000 people.

The Madinah airport project will now be operated as a private enterprise and Frost & Sullivan notes the Kingdom has been steadily moving towards aviation privatisation to enhance competitiveness and efficiency, with the sale of Saudia Airlines being the first step in this direction.

Vinod Cartic, senior consultant, business and financial Services, Frost & Sullivan, commented: “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.

“Growth is also more likely in the privatisation set up with airports looking to non-aeronautical revenue sources as well."

He added: “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.”

Cartic also suggested Madinah airport could pave the way for a Madinah Aerotropolis - an urban planning concept where all economic and business activity revolves around the airport.

Apart from the geographical size and the economic impact, an aerotropolis serves to boost the airport’s non-aeronautical revenue.

The non-aeronautical revenue associated with an aerotropolis like Madinah will also boost the economy of the city.

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