Abu Dhabi International Airport and UAE Economy

free essayUnited Arab Emirates (UAE) is traditionally known for the economic roles of trading. Due to its strategic location at the heart of the Middle East, the country expands into a logistics hub for regional businesses and industries. . For the last few decades, the country has developed its port and road infrastructures, and has recently developed both the rail and air transports to enhance close connections with its trading partners regionally and internationally. The air transportation sector is among the significant contributors to the country’s transport, which has experienced significant growth rates for the last few years. Arguments will be developed based on the contribution of the airport to the UAE economy and its development in the last ten years.  With a history dating back to 1969, Abu Dhabi international airport has significantly transformed to be the best airport in the region. It hosts over 30 airlines covering numerous global destinations. The number of passengers has significantly grown since 2014, having recorded 20 million passengers (Department of Economic Development, 2016). Abu Dhabi international airport is regarded as a major regional transport hub with over forty carriers having daily flights in and out of the airport. Other international airports in the region play a minor role and only represent a small percentage of regional passenger and cargo movement. In line with UAE’s vision 2020, Abu Dhabi is expected to capitalize on its strategic geographical position and rich transport infrastructure, which is characterized by significant improvements and expansion. In Abu Dhabi, transportation accounts for all economic activities. Thus, it is a profitable sector that is expected to make a significant contribution to the emirate’s economic expansion as it is un-reliant on predetermined resources.

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Growth of the Air Transportation Sector and Contribution to UAE’s Strategic Objectives

UAE has invested billions in public infrastructure for the last few years with the aim of upgrading existing facilities and strategizing for future economic growth (Oxford Business Group, 2015). The transportation sector has a share in the planned spending in the UAE. Abu Dhabi is leading the trends through the initiation of large scale projects among them the upgrading of the Abu Dhabi International Airport (Oxford Business Group, 2015). Although UAE is a major hub for cargo and passengers, it has taken significant expansion measures to meet future demands, which are highlighted by all the emirates’ vision and development plans. For example, Abu Dhabi’s economic vision 2030 outlines significant developments in the tourism industry through the increase in the number of passengers using air transport, such as Etihad airways, the national carrier (General Secretariat of the Executive Council, Department of Planning & Economy, & Abu Dhabi Council for Economic Development, 2008). In line with the UAE’s vision 2021, the Abu Dhabi government has drastically improved civil infrastructure. The government has undertaken airport expansion in its efforts to revolutionize the transportation sector. The plan encompasses three phases with the aim to increase capacity to about 30 million passengers per year by 2030 (General Secretariat of the Executive Council et al., 2008). One of the largest and valuable projects is the expansion of the Abu Dhabi International Airport to improve its capacity of 12.5million passengers to 47 million passengers annually. The upgrade also included the construction of a third terminal, an additional runaway and the Midfield Terminal Building (MTB) (Oxford Business Group, 2015).The growing transportation needs and significant growth of the airport propelled the creation of the Abu Dhabi International Airport’s Capacity Enhancement Programme (CEP) which aimed at improving service provision through developing customer service centered infrastructure (Abu Dhabi Airports Factsheet, 2017). The program has allowed the airport to continue serving its clients while still continuing other development projects. The completion of Terminal 3 in 2009 that provided Etihad Airways with a dedicated terminal to handle its clientele is among the successfully completed infrastructure projects. The completion of the 4,100 meter-long run way in 2009 also doubled the airport’s capacity and ranked it the first with such a big capacity; the airport has also managed to open new arrival halls at the lower terminals, which provide it with enhanced visitor floor and growth in the number of destinations accessed from the airport. It also has created an avenue for partnership with other service providers (Abu Dhabi Airports Factsheet, 2017).Without biasness and with specific reference to Abu Dhabi’s transport infrastructure, all the transport sectors have uniformly grown. This can be explained by the all rounded upgrading projects in the transport sector which include heavy investments in the road and rail infrastructure with the aim of connecting Abu Dhabi to the rest of the region. The first phase of the 1,200 km Etihad railway completed in 2014 involved the completion of the rail network connecting Abu Dhabi to the Saudi and Omani borders (Duken, 2014). Ports infrastructure has also been looked into thorough efforts to redevelop parts of the Zayed port to accommodate cruisers and construct Khalifa port (Oxford Business Group, 2015). On the other hand, air transport has been defined by continuous expansion of airports and updating of fleets to capitalize and serve the increasing passenger demands (World Trade Organization, 2012). A report by the Oxford Economics (2011) about the economic benefits of air transport in the UAE suggests that GDP, tax revenues, and jobs are the main economic footprints that measure the transport sector. The report further states that the economic value of the industry is connecting cities and markets and, thus, representing important infrastructure assets which benefits generate foreign investments from connections created between cities. In the UAE, the aviation industry accounts for a quarter of the total GDP (Raouf & Luomi, 2015). To be specific, the sector contributes 6.2% to the UAE GDP, which is generated from the output of the aviation sector (including airports and airlines), the supply chain, and employee spending in the supply chain. Additionally, tourism offers a catalyst benefit by raising the overall GDP to 14.7% (Oxford Economics, 2011). Statistics by the World Travel and Tourism Council reveal that travel and tourism’s total GDP contribution was 8.4% of GDP in 2014, and was forecasted to rise by 5.1% in 2015, and to rise by 3.8% per annum in 2025.

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Transport Sector Contribution to UAE’s Employment

As identified earlier, one of the economic footprints of air transport is the creation of jobs. The aviation industry has attracted a huge number of employees to work as fleet in their own premises and other global areas. Investments into the aviation industry have enabled major airlines to re-strategize with the aim of capturing the growing travel and tourism demands. As a result, major airlines have increased their fleet. The region supports 224,000 occupations in the UAE with 141 contracts and directly supports 37,000 occupations through spending employees in the aviation division and the supply chain. Employment opportunities have also been widened up in the tourism sector with the help of the mode of transport. Tourism trends in the UAE have risen recently and will significantly rise due the strategic positioning of the country as well as the entrepreneurial spirit. The contribution of air transport towards employment in the tourism sector can perhaps be explained statistically using key facts of employment contribution of travel and tourism to the country’s economy. In 2014, the tourism industry supported 518,500 jobs, a number that was expected to rise to 546,000 in 2015 and to 614,000 in 2025 (Turner, 2015).

It is impossible to ignore the contribution towards employment. Throughout its supply chain, the airline industry has notably increased the number of employees who again contribute to the country’s GDP and eliminates poverty levels. As the Abu Dhabi international airport infrastructure has improved, the airlines it houses have grown in capacity. This means that the number of passengers has also increased prompting a raise in fleet numbers. Within the airport, the free zone facilities characterized by the business and logistics park have created an assortment of employment opportunities. The hospitality industry is also represented with the presence of hotel facilities to offer transit services to passengers.

The increase in the use of air transport by both locals and foreigners has resulted in a raise in the number of flights and journeys, and, thus, increased the fuel consumption of aircraft. With the oil industry being the major contributor to the GDP, the airline industry has positively contributed to the creation of job opportunities for people within the industry’s supply chain. The sector has created free movement of people and goods to and from the country and, thus, increased the number of foreign investments. With more business minded people visiting the country, more local business operations have been created and, thus, expanding employment opportunities for the locals. Again, people from the country have managed to travel to other countries seeking for both business and employment opportunities.

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Government Policy and Expenditure on Air Transport Sector

The UAE government through the General Civil Aviation Authority (GCAA) has played a significant role in ensuring the accessibility and availability of air transport for trade and public needs. Irrespective of the fluctuation in fuel prices, UAE’s liberal policies and infrastructure have managed to maintain affordable levels of air transport. The open skies policy is among the policies that have had significant contribution to this sector; it has allowed unrestricted frequency capacity and types of aircrafts to be operated by designated airlines of each country in any type of services (Khan & Khan, 2016). It should be noted that an improvement in airport infrastructure and the improvement in the quality of regulation reduces air transport. Thus, the policy definitely reduced air transport, which translated to high numbers of people travelling and, thus, expanded infrastructure to cater for the demands.

Abu Dhabi’s economic vision 2030 policy document is anchored on building a sustainable economy and ensuring a balanced and regional economic development through developing a sufficient and resilient infrastructure which is proficient in aiding the projected economic growth. Ensuring efficient and safe transport infrastructure is the project undertaken by the government with the aim of guaranteeing that the emirate achieves its vision (General Secretariat of the Executive Council et al., 2008). This explains the numerous expansion projects in the aviation sector that have been discussed in the previous section of this paper. The policy document is indeed a blue print for the diversification of the economy leaving aside the oil sector. However, for the economy to diversity, it would require the support of effective and efficient infrastructure.

The continuous growth in the UAE’s aviation sector implies that the government has heavily invested in it. A report by the World Trade Organization reveals that the plans of UAE to become a global transport hub will attract an investment of about USD 136.1 billion over the next decade (World Trade Organization, 2012). UAE intends to improve its aviation infrastructure by capitalizing on introduction of new aircrafts for the five flag carriers, investing in new airport capacity throughout the seven emirates, and making Abu Dhabi a regional center for aircraft manufacturing and maintenance, and flight training (World Trade Organization, 2012).

With oil being the biggest contributor to the country’s GDP, the contribution of air transport has significantly affected the industry. The rapid growth of the air transport in Abu Dhabi has positively affected the production and trading of fuel in the emirate and in the entire UAE, which has led to the creation of more job opportunities in the supply chain. Major local oil players have boosted up production and distribution of fuel with the aim to cater for the increasing number of domestic and international airlines. Notably, the expansion of Etihad Airways is linked to the rise in demand for aviation fuel and creation of new employment opportunities. It should be noted Etihad airways operates terminal 3 of the Abu Dhabi international airport and has managed to maintain a good pace with the growing demands for both local and international travels (Oxford Business Group, 2015).

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UAE’s Economic Openness and Impact on Air Transport

UAE maintains a free economy, and it is politically stable and secure in the region; these are the elements that have propelled the country to a competitive edge as the region’s commercial hub and second largest economy. Trade plays a significant role in the economic life of UAE. With its position as a trading hub, UAE has managed to significantly improve the air transport through imports and exports. In order to determine the impacts of the UAE economy and free trade approach on the air transportation industry, it is important to briefly expound on the nature of the market and how the free trade approach works. It is significant to note that the country’s trade practices are in line with WTO international standards of free and fair trade. UAE imposes minimal import and export tariffs with neighboring countries and, thus, fosters trade. The country has also put in place agreements with international trading partners and double taxation agreements with the aim of limiting tax liabilities on imports and exports.

The removal of tax to all imports and exports creates a competitive market while establishing busy activities in the country’s major import and export zones. As a result, UAE has established itself as a major airport and logistical center with sophisticated transport infrastructure which can enable it move goods and people within short durations of time. UAE’s strategic provides access to billions of people within few hours travelling time explaining why business is significant to the country’s development. Through its open market, the country has also well-established relationships with the Middle East and other global nations which make it a business destination for many (Oxford Economics, 2011).

Thus, the nature of trading activities in the country creates a favorable environment for imports and exports. As already identified, UAE’s strategic location has a potential market for millions of people from either direction within a short duration of time, a trend that is complimented by the growing airline network for both local and international carriers (Oxford Economics, 2011). In order to cater for business needs and ease the movement of people and cargo, major transportation avenues have to be sought. With air transport being the fastest and efficient mode of transport into and out of the country, its scale and scope of coverage has to ominously fit into the requirements of the market. This trend explains the link between the economy and the air transport sector.

The open economy in the UAE market has enabled the country strengthen both its regional and international position with specific regards to foreign trade (Oxford Business Group, 2010). Air transport has made it possible to access these markets by providing a fast and efficient mode of movement for both people and goods in the region and other global nations. As a result, the government has embarked on numerous projects to ensure that the transport infrastructure is updated to cater for its economic needs.

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The paper has discussed in details the contribution of Abu Dhabi International Airport to the UAE’s economy. Findings from the literature review and discussion point towards positive influence of the airport in the country’s economic output and development through foreign investment, tourism and creation of job opportunities. The achievement of the UAE’s strategic objectives economically and through the tourism sector is the positive contribution of the airport to the county. Specifically, the airport has registered an increase in the number of visitors in the emirate which is in line with the UAE’s strategic objectives of increasing development in the tourism industry. The airport has notably contributed to the country’s GDP through the establishment and enhancement of a trading hub in the emirate.

Having noted the significant contribution that the airport has on the country, the government has invested billions of dollars with the aim of expanding the airport and revolutionizing it to cater for the growing demands. Strategic liberal policies including the open skies policy have significantly propelled the airport in contributing to the country’s economic growth. Finally, the economic openness of the UAE market enhances competitiveness and opens up the country to investors and foreign trade, which have in turn, revolutionized the aviation industry. Therefore, the discussion developed by this paper affirms that Abu Dhabi international Airport has positively transformed the economy of UAE by acting as a major trading hub and opening the country to international tour and business opportunities.

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UAE has used brilliant and relevant approaches to boost the air transportation sector. It is evident that the country understands its strengths from its geographical positioning. This is clearly illustrated by the approach to expand its transport infrastructure with the aim of opening up the country to more people for either business or tourism purposes. With oil as the major contributor to the GDP, UAE has established new non-oil economic avenues whose potential is momentous. The development of the transportation sector is also well formed to support oil production and transportation. For example, the expansion of air transport means that oil consumption by the aircrafts will rise, and, thus, promote the local oil production market.

The most striking approach used by the government is the expansion and renovation of its facilities. In doing so, the government appears to have understood the market requirements and demands. This has in turn been reflected through the growth in the number of tourists visiting the country. The expansion of the Abu Dhabi international airport to accommodate millions of expected people highlights the country’s preparedness to invest in its tourism industry. With Abu Dhabi’s economic vision 2030 being anchored towards the promotion of business and tourism, the expansion of the airport reflects the ability to actualize the vision. The expansion and modernization of the airport has also enabled major airlines provide customer care to clients which in turn adds value to the quality of customer service.

Notable expansive measures include the construction of the Midfield Terminal Building (MTB), which houses the second biggest courier Etihad airways, and the setting up of a novel Air Traffic Control Tower (ATC). These technologically advanced infrastructures provide the airline’s clients with comfortable and high class services while at the same time attracting more people to the facility. This means that in a way, the airport itself is a tourist attraction in line with both the emirate’s and country’s vision of promoting tourism. Again, the comfort and customer care provided to the visitors add value to the airlines served by the airport which again translates to a positive contribution of airlines in supporting the economy of the country.

UAE’s liberal policies in the aviation industry are highly attributed to the development of major air transport infrastructure as already identified in the paper. The liberalization of international air market has enabled governments to recognize the benefits of allowing market forces to determine the growth and development of air services. While liberalization may lead to loss of market share by the local carriers, the loss may be compensated by high traffic growths as liberal policies stimulate the market. Despite the fact that increased competition weakens the viability and profitability of local carriers, liberal policies open up a country’s economy to access a wide pool of investments. The ‘open skies policy’ imposed by the UAE government has managed to not only improve airfares but also improve the infrastructure and employment, and enhance competition among key players. Liberal policies increase air service levels which in turn stimulate additional traffic volumes and increase economic growth. Perhaps this explains the increased passenger and cargo volumes in the Abu Dhabi international airport which has prompted the government to come up with a plan to increase its capacity. With its base in Abu Dhabi, the Abu Dhabi international airport has managed to improve its operations and fit into UAE’s vision 2021 of creating economically safe and efficient transportation models.