Airline Business Set for Take-Off?

Cruising down the runway at 200 kilometres per hour in Stafford Clarry's sleek SUV, you can’t help feeling impressed with the Middle-East’s newest airport.
 
Clarry is the American director of the British-designed Erbil International Airport, a 400 million US dollar, state-of-the-art facility capable of handling four million passengers each year and home to the fifth-longest runway - at 4.9 km - in the world.
 
After four years of construction, the scheduled June 10 opening of Erbil International will be the just the latest advance for an Iraqi airline sector that some experts see as primed for take-off.
 
However, the industry faces a raft of problems from the risk of insurgents bringing down a plane to internal political meddling and even a rumbling 20-year-old law suit against the state carrier.
 
With the economy recovering, an increase in flights to and from Iraq could provide a much-needed boost.
 
For decades, Iraq's commercial planes were grounded by security problems, a lack of infrastructure and, in part, by a slate of United Nations Security Council "no-fly zone" restrictions and sanctions that were imposed after Iraq's invasion of Kuwait in 1990.
 
In recent months, however, airlines have been dramatically increasing flights to and from Iraq, while new regional and European airlines are jockeying for access to this emerging market.
 
The first flights to London in 20 years have started via Sweden, though they are dogged by the threat of legal action by lawyers for Kuwait Airways with a claim for 1.2 billion dollars in compensation dating back to the invasion of Kuwait.
 
"The issue has become seriously dangerous,” Hassan Shaban, a Baghdad-based legal and political analyst, said of the dispute. “If there is no agreement between Iraqis and Kuwaitis, it must come through intervention by the Arab League or United Nations. This case can’t go on like this, or it will deeply damage the future of aviation in Iraq just as it is beginning to recover."
 
So far, this has not hampered the rest of the airline business in Iraq. German flag carrier Lufthansa has resumed regular service from Frankfurt to Erbil, and announced it would recommence flights to Baghdad by summer. The United Arab Emirates' Etihad Airways has restored its five weekly flights from Abu Dhabi to Baghdad.
 
"Eighteen months ago only six airline companies were operating in Iraq; now, there are 26 airlines, Arab and international. In addition, we are now capable of handling technologically advanced jets and cargo airplanes. These are transformational steps in the Iraqi aviation sector," Adan Bilaibl, general-director of Iraq's civil aviation authority, said.
 
Experts, however, question whether the central Baghdad government will give big regional airports like Erbil airport a free ride.
 
"Iraq's internal politics will greatly influence the aviation sector because it has a role in the country’s development and will comprise a significant part of the Iraqi economy. The people in control in Baghdad will be keeping a close eye on this sector,” Shaban said.

Business analyst Faded al-Bidairi, chairman of the Federation of Chambers of Commerce in Iraq, said, "Building a giant airport away from the control and monitoring of central government might have certain consequences.

"The fact that no revenue will go to the state treasury might open the door to for provinces to sign agreements with giant international companies for joint projects that don't benefit Baghdad. It could happen that these international corporations would gain the upper hand in the project and end up controlling the resources of the state. This would be a dangerous precedent."

State-run Iraqi Airways, one of the oldest airlines in the Middle East, has led the way in the industry’s resurgence. Founded in 1945, it was grounded from 1991 to 2004, when it made its first international flight to Amman.
 
The company now flies to 15 cities in 14 countries. It has a fleet of 12 planes with an additional 47 on order, according to the airline.
 
Bilaibl says the government has launched a ten-year plan in coordination with international agencies to further develop Iraq's aviation sector.
 
"The plan takes into consideration an increase in the number of passengers to one million annually. The current number of passengers is 500,000. The total number of flights will be 400 per day," he said.
 
The possibility of increased travel options boosting cultural exchanges and economic development has not been lost on the Iraqi government or the newly arrived airlines.
 
“We have chosen to invest in selective growing markets and this region is one of them,” said Joachim Steinbach, vice-president of Lufthansa’s sales and services for the Middle East. “As Erbil’s economic development [gains] momentum, airlines are crucial in fuelling economic growth, regional development and ultimately growing prosperity. We are happy to provide our small share to that.”
 
Nuri Osman, chief of staff for the Kurdistan Regional Government prime minister, believes the impact of the new Erbil airport on the overall resurgence of both Iraqi Kurdistan and Iraq cannot be overestimated.
 
"Kurdistan, which is land-locked, was desperately in need of a big international airport. It will also have a huge role in the country and a significant role in the region," Osman said.
 
Although the Kurdish north is regarded as relatively secure, that cannot be said of the rest of the country.
 
Tawfiq al-Yassiri, a retired senior military official and terrorism adviser to the ministry of defence, said, “The opening up of Iraq to countries in the region and the world by air, and vice versa, will be a huge challenge for security forces, mostly because the tactics used by extremist groups are evolving at the same pace as security methods. Everyone knows terrorists target planes and airports, so the threat will increase with the increase in the number of flights and passengers coming to Iraq.
 
"The most worrying factor is the lack of experience of the local management in running airports when it comes to terrorists and criminal groups. These groups use complex and advanced techniques that have proved to be successful even in countries that are considered progressive and pioneering in security and intelligence tactics. As I said, the threats can only double with the opening up of Iraq to more flights and air traffic.
 
"In many countries, the strikes carried out by extremist groups are often directed against land not air [targets], because the land routes are much easier [to infiltrate] than security measures at an airport. But in Iraq, it is an entirely different story. Iraq is going through a deteriorating security situation overall, and there is financial and administrative corruption in most offices, ministries and corporations - including airports. This corruption might be taken advantage of by militant groups with enough funds to pay bribes."
 
Airport director Clarry said that Erbil International, a former military airstrip built in the 1970s, can offer two things that airlines will find difficult to ignore: tight security and fuel.
 
"We are among the least expensive fuel services providers in the world because this is Iraq; extraction cost is low and crude oil is the best quality in the world," he said.
 
He said airport authorities are trying to reduce the price in Erbil to 50 cents to attract more airlines. The average global price for jet fuel is roughly 80 cents per litre, according to the International Air Transport Association.
 
The KRG funded the 400 million dollar price tag for construction of the airport, according to Osman, and will oversee all aspects of security on which some 60 million dollars of the overall cost was spent.
 
The regional government also seems intent on guarding the expected revenue from the new airport.
 
“The KRG started the project and built it. A budget for the airport has already been allocated by the [regional] government. The Baghdad government's [civil aviation authority] will help supervise the airport but it belongs to the KRG council of ministers," Osman said.
 
"No profit from the airport will go to the government Baghdad. The government in Baghdad has not provided construction or financing, so the income from the airport will be for the KRG alone."
 
It remains to be seen whether Baghdad is content to be cut out of a potentially lucrative international endeavour. Last month, an increasingly profitable, privately-funded airport in Najaf accused the central government of political interference when it was closed down for a period, a charge Baghdad strongly denied. [See story: Airport Closure Sparks Najaf-Baghdad Tensions]
 
In the meantime, however, systems on the ground at Erbil International are "go" as the airport prepares to increase its role in Iraq's expanding aviation industry.
 
"We are in a prime position,” Clarry said. “What we are trying to do is attract more traffic and more flights to more destinations.”
 
Mohammad Furat is an IWPR local editor in Erbil.
IWPR local editor Hogar Hasan and IWPR-trained journalist Shorish Khalid contributed to this report from Erbil and Sulaimaniyah.
Ali Kareem contributed to this report from Baghdad.