Dubai unveils new airport with superhub ambitions
Dubai opened a new airport to passengers early Sunday, underscoring its ambitions to become a global superhub and piling further pressure on traditional hubs such as London Heathrow.
"We are inaugurating not just an airport, but a whole new focus and vision about what Dubai's aviation strategy means for the world," Paul Griffiths, CEO of Dubai Airports, noted in his opening remarks.
It's roughly a 20-mile drive from where the last skyscraper stands through vast stretches of desert, emblematic of the envisioned size of the project. Al Maktoum International, a central piece of the Dubai World Central commercial complex, can handle 7 million passengers a year for now. By 2030, the facility could have five runways and accommodate 160 million passengers per year, making it the largest airport in the world in terms of passenger capacity.
"People particularly in Europe and North America are probably looking at this and thinking how on earth is this possible. The answer is because we don't actually derive much of our market from the point-to-point market here, the population is relatively low compared to the size of the airport," Griffiths told CNBC.
The new airport has been open to cargo traffic since June 2010, and three commercial airlines have signed up to operate passenger flights. The trio includes Hungary's Wizz Air, Kuwait's Jazeera Airways and Bahrain's flag carrier, Gulf Air. More are expected to follow in the coming weeks.
"It will bring much-needed extra capacity to Dubai as well as allow existing airlines to perhaps start flights to and from both Dubai airports," Saj Ahmad of Strategic Aero Research,explained to CNBC.
Competition has been intense among regional airports fighting to tap lucrative global travel patterns. Authorities in Doha, Abu Dhabi, and Istanbul are all pursuing capacity expansions of their own, raising questions about future oversupply.
"There won't be an overcapacity issue because the airport at present only has one terminal and one functioning runway. It will take many years for the entire airport and its five runways to become fully operational,"Ahmad added. A decision on hosting the world's fair, the 2020 Expo, in favor of Dubai is expected to provide a substantial demand boost.
Al Maktoum International will to replace Dubai International somewhere down the line, which is undergoing its own $7.8 billion refurbishment program that will take it up to 100 million passengers a year by 2020.
In the first eight months of 2013, Dubai International handled 43.9 million passengers, up 16.4 percent compared with the same period in 2012. It expects to close out the year with 65.4 million passengers, a figure that would place it right behind London Heathrow (LHR) in terms of international traffic. Griffiths was confident Dubai would overtake LHR "somewhere towards the end of 2014".
Griffiths, formerly managing director at Gatwick Airport, felt the U.K. was missing out on significant economic contributions of aviation.In Dubai, the industry is forecast to provide 32 percent of economic output by 2020.
"London and the whole U.K. economy desperately needs more air capacity. The problem is the political will just doesn't seem to be there," he said.
(Read more: Dubai real estate is hot again - maybe too hot)
Currently, the world's busiest airport is Hartsfield-Jackson International (ATL) in Atlanta. The facility handled 95.5 million passengers last year of which almost 90 percent was domestic traffic,according to its own data. In freight, Hong Kong remains the world leader, which year-to-date in August handled some 2.64 million tons.
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