Saudi Arabia Weighs Launch of New ‘National' Airline

 - July 1, 2021, 12:02 PM
Abdullah Aljawini, CEO, Dawli Aerospace, Riyadh (Credit Dawli Aerospace)

Saudi Arabia plans to launch a new national airline to allow it to take advantage of burgeoning economic growth and bring visitor numbers to the kingdom to a target of 100 million in the next decade. Crown Prince Mohammed bin Salman announced the plans earlier this week as part of a new national plan to make Saudi Arabia a regional logistics hub, by doubling the kingdom's air cargo capacity.

Abdullah Aljawini, CEO of Riyadh-based aviation consulting firm Dawli Aerospace, said he was unaware of any likely name or a timeline for the airline’s launch, but added it would be central to plans to diversify the economy away from oil in the next decade.

“It is expected to be a five-star airline,” he told AIN. “Saudi Arabia needs to be more competitive with its regional rivals. The goal is to support Vision 2030, by reaching 100 million tourists a year in Saudi Arabia. The idea is an airline similar to Etihad Airways, Emirates, or Qatar Airways.”

According to news reports, Saudi Arabia saw 16.5 million tourists in 2019, up 7.6 percent on the 15.3 million in 2018. Tourism spending in 2019 totaled $41 billion, but that figure fell to $16.9 billion in 2020.

In an indication of the coronavirus pandemic’s effect on the kingdom, flights restarted on May 17 after a prolonged shut-down, as last year's Hajj pilgrimage figures, normally over 2 million, fell to around 50,000.

“Due to market segmentation, I don't think the new airline will pose any direct competition to the operations of low-cost carriers, Flyadeal or Flynas, but it’s likely the Saudi airline sector will experience some form of strategic market consolidations or acquisitions in the near future,” he said.

Incumbent national carrier Saudia, and Flyadeal, are based in Jeddah. Flynas is based in Riyadh. “[The new airline] will most likely be based in Riyadh,” said Aljawini.

The plans call for a new airport south of Riyadh to serve the airline and focus on business and tourism, leaving Saudia to manage religious tourism, which recently accounted for around three-quarters of tourist spend in the kingdom. Aljawini said other blueprints could involve the expansion of the existing airport in Riyadh.

He is calling for a reduction in costs imposed on airlines operating through Saudi airports, as his research in 2019 showed that airlines passing through Saudi airports had to pay 3.75 times more per passenger than those passing through airports in neighboring countries.

“Today, there are difficulties in attracting new international airlines from strategic markets to fly into Saudi airports,” he said. “No U.S. airline is presently flying to Saudi Arabia. Cathay Pacific has ceased operations, while Lufthansa decreased their flights.”

Saudi Arabia's sovereign wealth fund, the $430 billion Public Investment Fund, should have a major say in the airline’s creation. “The PIF is likely to be the main investor,” he said. “It will involve a huge capital investment.”

In 2019, the PIF launched the kingdom’s first national commercial helicopter operator with an initial capital of $150 million, to serve its nascent tourism sector. The size of the fund's stake remains undisclosed.

Reuters reported last month that Yazeed Alhumied, who heads the fund's Middle East and North Africa (MENA) investments division, had taken the position of the PIF’s deputy governor. The PIF lists several positions Alhumied holds, including board memberships of Saudia, Civil Aviation Holding, and Flyadeal. The fund will likely inject at least $40 billion a year into the local economy until 2025.

“I don’t think Saudia will be scaled back," Aljawini said. "The Saudi air transport market is the largest in the MENA region. If the reforms take place vis-à-vis the Saudi Air transport sector regulations, I believe that the present three airlines will not be enough to serve the Saudi economy in the future."