World’s Biggest Airport is Being Planned at Dubai for $36 Billion

Dubai is likely to rely on debt for a significant part of the financing as the city aims to spend $35.7 billion to develop its second airport and logistics hub in the south of the city.

The media reported citing two people with knowledge of the plan that including Al Maktoum International airport, over the next 12 years, the investments will be made in Dubai World Central and associated facilities. The media did not name the sources because the information isn’t public.

The media reported that to raise for initial expansion, the government is asking banks to bid for a $3 billion loan and the spending plan is outlined in documents supplied for inviting bids. HSBC Holdings Plc is the financial adviser on the loan.

The sources were quoted saying that based on a formula linked to passenger numbers at the city’s two airports, Dubai’s department of finance will pay for the loans as the loan is being raised by a special purpose company. The company will also raise future funding for the project including debt.

According to Dubai Airports’ website, including for logistics, offices, residences and golf, Al Maktoum International is at the heart of Dubai World Central, a 140 square kilometer (54 square miles) multiphase development of six zones. Accoridng ot the company, costs for the entire DWC development have been estimated in excess of $32 billion.

The proposed borrowing, especially in the context of the chunky headline number, may raise some questions marks and even concerns in the minds of investors,” Chavan Bhogaita, head of market insight and strategy at National Bank of Abu Dhabi PJSC, said by phone. “In recent years we have seen a significantly more mature, sophisticated and sustainable approach to debt financing by Dubai Inc. entities.”

With an ultimate capacity exceeding 220 million passengers and 16 million tons of cargo per year, Al Maktoum will become the world’s largest airport upon completion. Dubai plans to move flagship carrier Emirates to Al Maktoum by 2025 as Al Maktoum is close to World Expo 2020 site. A spokesman for Dubai’s department of finance declined to comment.

As the city developed into a hub for trans-continental traffic between America and Europe with Asia, Dubai International Airport, the emirate’s main facility now, is already the world’s busiest by international passengers. As Emirates expanded into the world’s biggest airline by international passengers, traffic rose at an average compound annual growth rate of 13 percent between 2000 and 2015.

The government said last month that up from 78 million in 2015, Dubai International and Al Maktoum will grow to serve 146 million passengers by 2025. It said that while Dubai International is approaching maximum capacity and is facing space constraints, the master plan for Al Maktoum’s second phase has been approved and the detailed design work is under way.

Dubai Airports Chief Executive Officer Paul Griffiths said in October that spurred on by the expansion of Emirates airline, Dubai International Airport expects to become the world’s busiest within this decade, overtaking Beijing and Atlanta. The facility expects 90 million people to use the facility next year and expects passenger traffic climbing to 83 million this year.

(Adapted from Bloomberg)

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Categories: Economy & Finance

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