The Public Authority of Civil Aviation (PACA) of Oman is the institution responsible for the air private and commercial transport of the Oman Sultanate. The PACA is responsible of seven airports in the Sultanate. The airports have a combined capacity of 90 million passenger per year, with connections to local destinations as Yemen, Sudan, Ethiopia, Eritrea and other countries in Europe, America and Africa (Financial Tribune, 2015).
PACA has studied the commercial viability of the Adam Airport. The Airport has reported in the previous three fiscal years a decrease in the passenger traffic from 120,000 passemgers per year in 2012 to 90,000 passengers per year in 2015. The best scenario is to relocate the airport from the current location to Masirah.
Masirah has currenty one military air base, but the city acquired importance due to the oil and gas activity in the area. The idea of PACA is to relocate the airport with the IATA code and the air frequency.
The airport in the past three year had problems in the supply chain operations, 50% of the providers of the airlines moved to the United Arab Emirates in the last ten years. The agency had to buy resurces from other parts from Oman and The United Arab Emirates by import duties and affecting the tax benefits the airport. The cost per flight increased 30% in the last ten years. The offered services by the company are for leisure and business travelers, and it is not a good option to increase the price of the final good (airfares) to the clients. There are other airport competitors in the Middle East, but PACA consider to maintain the IATA airport code and frequency to avoid economic loss to the country.
The airport has a 100,000 m2 area in the industrial zone of Adam with two roads, one for departures and one for arrivals. The market for the airport in Oman and the region is growing demanding new frequencies and accomodations in the airport. The current installations have no flexibility in the modification of the airport structure (Petrány, 2013) due to the road location and brick and mortar construction (Burley, 2015).
The airport administration decided at the last board meeting two months ago move the airport from Adam to Marirah with the following considerations:
■ Availability of all the required airport services and providers at better prices with tax benefits.
■ Marirah is a local market bigger than Adam with a potential market for the company of 5 million passengers per year in the following five years.
■ Marirah offers better duty and custom conditions than Adam with more container transport traffic, lower tariff, and more connections than Adam.
■ The new facilities will have a modular distribution with a total area of 200,000 m2 and the capacity to transport 14 million passenger per year.
■ PACA will invest 1.5 billion dollars in the relocation.
■ The time for the relocation will be three years.
Risk Project Analysis
Threats identification and estimation
■ Operational: The plan has a switch time of three months when existent equipment from the Adam Airport is transported to the new facilities in Marirah. Potential problems in the transportation and delays may affect the original plan and reduce revenues to the airport and PACA (Mind Tools, 2015). The risk is estimated in one additional month with the following loss to the company:
Operational_Risk: 1 * 1/12 * (5,000,000 passenger) * (60 USD/passenger) = 25,000,000 USD
■ Project Delay: The project plan is four years, but there is a risk of delays in the project. A delay will affect the production numbers of the new facilities in Marirah, which will have a capacity of 5 million passenger per year (PM4ID, 2014). The estimation is in one additional month to the project with the following loss to the company:
Project_Delay_Risk: 1 * 1/12 * (5,000,000 passenger) * (12,000 USD/passenger) = 50,000,000 USD
Financial Risk: The company has a budget of 1.5 billion USD using 600 million USD in cash from Sultanate and 900 million USD from a bond emission in the Dubai Stock market with a return rate of 7/3%. The first 600 million USD will be used to buy the major equipment, but the rest of the money is necessary to pay contractors, land and legal permission in the Marirah. The risk is low because the company has three potential partners inside Marirah which are interested in having a stake in the company. The potential loss is concentrated in longer interest payments before the execution of the project (Jutte, 2015). The estimation is the following:
Financial_Risk: 10% * 7/3% * 900,000,000 = 2,100,000 USD
Risk management:
The company can manage the risk with the following strategies:
■ Share the risk with a local partner: PACA has no experience in the new airport, it is necessary to give a stake in the project to a local partner that knows the market with relations with the government and all the supply chain of the company.
■ Control the risk: The potential delays of the project can be controlled with a close project plan tracking and executing the necessary corrections to avoid delays in the critical path of the project.
Project Plan
Swot Analysis of the project:
Strengths
■ PACA has enough cash to fund the project in the initial phase giving confidence to the project stakeholders to get done the project in time.
■ The project is economically viable, the return of the investment is guaranteed five years after the opening of the new airport
Weakness
■ The project will affect the passenger traffic for two months; that is the transport time of equipment from Adam to Marirah.
Opportunities
■ The Emirates market represents a 20,000 cars-per-year market for the company, higher than the Oman market of 5,000 cars per year.
■ The Emirates industry is more developed than the Oman industry with more providers for the supply chain of the company.
Threads:
■ The labor market of Dubai is unknown for the company.
■ The unability of the company to sell debt bonds to fund the project.
Reference List
Burley, K., 2015. What Is a Deliverable in Project Management? [Online] Available at: http://smallbusiness.chron.com/deliverable-project-management-31615.html [Accessed 04 May 2016].
Dubai Ports, 2015. DP World. [Online] Available at: http://web.dpworld.com/ [Accessed 04 May 2016].
Financial Tribune, 2015. IKCO Targets Africa With Oman Plant. [Online] Available at: http://financialtribune.com/articles/economy-auto/17778/ikco-targets-africa-oman-plant [Accessed 04 May 2016].
Jutte, B., 2015. 10 GOLDEN RULES OF PROJECT RISK MANAGEMENT. [Online] Available at: https://www.projectsmart.co.uk/10-golden-rules-of-project-risk-management.php [Accessed 04 May 2016].
Mind Tools, 2015. Risk Analysis and Risk Management. [Online] Available at: https://www.mindtools.com/pages/article/newTMC_07.htm [Accessed 04 May 2016].
Petrány, M., 2013. The Ten Most Unbelievable Abandoned Car Factories. [Online] Available at: http://jalopnik.com/the-ten-most-unbelievable-abandoned-car-factories-1458743708 [Accessed 04 May 2016].
PM4ID, 2014. Defining Risk. [Online] Available at: http://pm4id.org/chapter/11-1-defining-risk/2/ [Accessed 04 May 2016].
RAJA, R., 2015. Assembly line design and balancing. [Online] Available at: http://publications.lib.chalmers.se/records/fulltext/220682/220682.pdf [Accessed 04 May 2016].
