Saudi Arabia Launches New Flag Carrier, Riyadh Air

 - March 13, 2023, 3:43 PM
Former Etihad Airways CEO and Riyadh Air's newly minted chief executive Tony Douglas (left) and Boeing Commercial Airplanes CEO Stan Deal appear at the 2019 Dubai Airshow to announce plans for the Etihad 'Greenliner,' at the time the latest Boeing ecoDemonstrator. (Photo: David McIntosh)

Saudi Arabia has launched a new flag carrier called Riyadh Air, ending months of speculation about when the open secret would finally obtain an official rubber stamp. 

“The new national carrier will leverage Saudi Arabia’s strategic geographic location between the three continents of Asia, Africa, and Europe, enabling Riyadh to become a gateway to the world and a global destination for transportation, trade, and tourism,” a statement carried by Saudi Arabia's Vision 2030 website said. “Riyadh Air aims to enhance customers’ journey while connecting them to over 100 destinations around the world by 2030 through offering an exceptional experience with authentic, warm Saudi hospitality at its heart.”

The statement did not indicate the airline's start date.

Yasir Al-Rumayyan, governor of Saudi Arabia's Private Investment Fund, will serve as the airline’s chairman, while former Etihad Airways CEO Tony Douglas, who cut ties with his former employer to join the new airline, becomes chief executive. “The airline’s senior management will include Saudi and international expertise,” an official statement carried by the Saudi Press Agency (SPA) said.

SPA said the Public Investment Fund (PIF) would own the airline. As Saudi Arabia’s sovereign wealth fund, the PIF controls assets of about $700 billion, making it about the same size as the region’s other heavyweight pension provider, the Abu Dhabi Investment Authority (ADIA).

“The new national airline represents PIF’s latest investment in the sector, along with the recently announced King Salman International Airport masterplan,” the U.S.-headquartered Sovereign Wealth Fund Institute said.

The state mouthpiece said Riyadh Air would serve as a catalyst for the Saudi National Transport and Logistics Strategy and the National Tourism Strategy by increasing air transport options, raising cargo capacity, and, in turn, increasing international passenger traffic. “The airline will provide tourists from around the world the opportunity to visit Saudi Arabia’s cultural and natural attractions,” SPA said.

Saudi research house Argaam said the new airline would drive economic growth and diversification. “The new carrier aligns with the PIF’s strategy to unlock the capabilities of promising sectors that can help drive the diversification of the local economy,” it said. “The airline is expected to add 75 billion Saudi riyals ($20 billion) to non-oil GDP growth and create more than 200,000 direct and indirect jobs.”

The launch of the new airline throws into doubt the raison d’ĂȘtre of Saudia, the incumbent flag carrier founded in 1945. Saudia's apparent reluctance to move its base from Jeddah, the traditional home of aviation in the Kingdom, to Riyadh, led Crown Prince Mohammed bin Salman to scrap the idea, only to produce plans for the new airline.

A decision on which company will provide MRO services to the new flag carrier remains unannounced, but the options include establishing an entirely new concern under Riyadh Air’s umbrella, employing the existing services of rapidly expanding Saudi Arabian Engineering Industries (SAEI), or buying in international expertise from mature players such as Lufthansa Technik.

The Associated Press said Sunday that national oil company Saudi Aramco reported 2022 full-year profits of $161 billion, on the back of average daily production of 11.5 million barrels of oil per day (mbpd), a figure expected to rise to 13 mbpd by 2027. With the oil company’s profits increasing 46 percent in 2021, such sums of money should prove reassuring for Riyadh Air’s planners.

The Wall Street Journal, citing anonymous sources, reported Saudi Arabia may purchase up to $35 billion worth of planes from Boeing. 

In an op-ed in Arabian Gulf Business Insight, John Grant, partner at UK consultancy, Midas Aviation, said that competition for connecting traffic across hubs in Dubai, Abu Dhabi, and Doha—which serve Emirates, Etihad, and Qatar Airways, respectively—would only increase, driving down fares.

“Saudi Arabia and India, two of the largest markets from which the Middle East sources volumes of connecting traffic, have had enough and are about to fight back for not just their own share but a bigger share of the total market,” he wrote.

“The initiative fits in well, with an effort to supplant Dubai as the regional hub; Dubai is the new Hong Kong, with Saudi Arabia coming up fast,” a Western lawyer based in the Kingdom told AIN. “They’ve been working the issue for some months. [The timing of the announcement] was delayed by negotiations with Boeing. Saudia will continue in this sector, in addition to focusing on international [business] for pilgrimage—Hajj and Umrah—as well as some domestic [flights].”

In a LinkedIn post, Ted O’Byrne, CEO of AviLease, the aircraft lessor established by the PIF with an assumed mandate to source aircraft for the new airline, said the firm would endeavor to launch the production and distribution of sustainable aviation fuel (SAF) to airline customers to “advance the production and uptake of SAF within the Kingdom and around the world.”