Location, location, location – it’s what Dubai is all about. The city’s position at the crossroads of Asia, Europe and Africa has facilitated trade for centuries and its geography may also define its future.
Dubai is within 2,500 nautical miles, or about a four-hour flight, of 2.5 billion people and within 4,500 miles of five billion people – 80 per cent of the world’s population. Imagine concentric rings spreading out from Dubai across a map and you will see the rings encompassing the most populous regions of the world. Dubai aspires to use its location to become a trading hub for the modern age, linking the continents along air routes that cross Middle Eastern skies.
It is a grand vision for the city, but not necessarily one that stacks up. After all, Kansas is in the middle of the United States but that hasn’t helped it compete economically with New York or California.
A weighty piece of research published last week by Airbus, the aerospace company, gives some hints as to whether Dubai’s location will translate into economic growth. Air travel is a particularly good barometer of economic growth as one is dependent on the other. Air travel tends to grow rapidly where people have the money, inclination and time to want to move but disappears when they are grounded by poverty or instability.
According to Airbus’s projection for air travel from now until 2026, the average annual growth rate in traffic will be 4.9 per cent. The research only looks at regional traffic but it is safe to assume that Dubai will be a large component within the Middle East’s numbers – there really are not that many globally connected cities in the region.
The good news is that passenger traffic from the Middle East/Dubai to every region on the planet will grow by more than the world average. Traffic to China will grow at 7.3 per cent a year; Russia 6.5 per cent and South Africa 9.5 per cent.
However, it will be Dubai’s trade with Western Europe that will be the most important driver of economic growth. By 2011, the Middle East to Europe connection will enter the top 10 busiest air traffic routes for the first time and grow at 6.5 per cent a year for 20 years. For a comparitively small population region like the Middle East to enter the top 10 of all air passenger movements is an indication of just how much economic traffic will be generated by Europe.
Traffic to North America may grow at a faster rate in the period to 2026 (by 7.1 per cent a year) but the actual number of people flying will be relatively small. In fact, the only other Middle Eastern route that enters the top 20 busiest regional pairings over the next 20 years is to India, which means the people at Airbus think Dubai’s building boom will continue.
The Middle East’s leaders should consider these traffic figures and rethink where their friends truly are. The United States may wield the most diplomatic (and military) clout in the region, but it is Europe that will provide the economic growth in the future. Perhaps this is why I am hearing rumours that Emirates will change the inagural flight of its first A380 from New York to London.
Airbus’s projections for air freight to and from the Middle East are also interesting. The global average growth rate is 5.8 per cent a year, but in nearly all cases the Middle East’s air trade is below that figure. Freight trade with Asia will grow at 3.9 per cent a year; Europe 3.6 per cent; India 5.4 per cent and Japan 2.2 per cent.
These figures are worryingly low given that Dubai is building an enormous new airport out at Jebel Ali in the belief that it can become a freight hub for the world. It seems unlikely that Dubai will succeed in that ambition if the region cannot grow freight volumes at the global average.
So position isn’t everything. Just because Dubai is on the way from one place to another does not mean people, or goods, will stop there. Location is a convenience, not a reason for visiting. The good news for Dubai is that lots of Europeans are about to find that reason to visit. (David Robertson is Business correspondent The Times of London)
Freight is the key to Dubai’s bid for air supremacy