The GDP contribution from Gulf Cooperation Council’s (GCC) tourism sector is expected to increase from around $130 billion in 2023 to above $340 billion by 2030, equivalent to more than 10% of GDP in the region, said Fitch Ratings.

Having set ambitious goals for the tourism sector that will help reduce their dependence on oil, the GCC countries expect the aviation industry to play an essential role and Fitch Ratings expect air passenger traffic to show material growth.

The region already has some of the world’s most modern airports, including Dubai International Airport (UAE, 87 million passengers), Hamad International Airport (Doha, Qatar: 45.9 million) and King Abdulaziz International Airport (Jeddah, Saudi Arabia: 42.9 million).

Fast recovery consolidated in 2023

A sample of GCC airports showed that traffic in 2023 was 8% above 2019 levels and was up by about 20% from 2022. In most of EMEA airports covered by Fitch, 2023 traffic was 97% of 2019 levels. GCC infrastructure plans are for air traffic to double by 2030.

Significant investments to date

The UAE and Qatar have invested in their airports in recent decades, along with the development of their respective flagship airlines, making them among the world’s biggest international passenger hubs. More recently, Saudi Arabia expanded its investments in airports to increase capacity to support the anticipated population growth and extra international visits, including pilgrim tourism.

This year, Dubai announced a $35 billion plan to transform Al Maktoum International Airport to accommodate 260 million passengers a year.

Shift to public-private partnerships

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 ($10 billion and about $1 billion, 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 (TAV; BB+/Stable). The first PPP airport concession in the GCC was Medina Airport (in which TAV has a 26% stake), which closed in 2012 with $1.2 billion financing, led by local banks, to fund the expansion of the existing airport to accommodate growing passenger numbers.

Diversifying funding sources

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. Fitch’s current portfolio includes issuers with different debt structures, from corporate-like issuers with senior unsecured debt and looser covenanants 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.

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