New Saudi airline plans gain momentum

Plans for a new Saudi airline appear to be gaining momentum, according to multiple sources familiar with the planned development. Proponents of the move hope it will strengthen the country’s airline industry in its fight to compete with the best-performing carriers from neighboring Gulf states, such as Emirates, Etihad and Qatar Airways.

“Plans for the inauguration of the new airline and its sister leasing company will progress as planned,” said Abdullah Aljawini, CEO of Riyadh-based aviation consultancy Dawli Aerospace. AIN.

On June 30, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), announced the creation of a new aircraft leasing company, Avilease, but, to date, no official statement has been made. on the airline’s projects, AIN understand. At the time, the PIF said its assets under management were $620 billion.

“‘AviLease’ will offer leasing, trading and asset management services for the latest generation of aircraft from leading manufacturers,” the PIF announcement reads. “The company will evolve through buy-and-leaseback transactions, secondary portfolio acquisitions, direct orders from aircraft manufacturers and corporate acquisitions.”

A company with easy access to the new metal would obviously accelerate plans for a new airline, an entity that would be more or less mandatory if Saudi Arabia is to achieve the goals it sets for itself. It is expected that after an initial wave of narrow body deliveries, the new airline will have a preference for widebody aircraft.

“Friends of the PIF say it’s serious; they have already renamed the planes of the new airline Neom,” said a Western lawyer based in Saudi Arabia, speaking to AIN condition of anonymity. Neom is one of three massive tourism and lifestyle projects planned for the arid northwest Red Sea coast.

“Once the new carrier is officially announced, I’m sure you [find] the right people to talk to,” said Fahd Al Cynndy, CEO of maintenance group Saudia Aerospace Engineering Industries (SAEI). AIN in January, at a corporate briefing in Dubai. “At the moment, it’s still a work in progress.”

According to the Saudi-US Trade Group, airport development will be a key part of Saudi Arabia’s plans to increase passenger throughput. “Saudi Arabia has earmarked $147 billion to improve its airport facilities to serve 330 million air travelers by 2030, develop its transport sector and bolster plans to launch a new national airline alongside established companies Saudia, Flynas and Flyadeal,” he said this month.

A new “Saudi Airport Exhibition” is due to take place in the capital, Riyadh, in November. The appetite for international events in the country is high, and a local source said AIN that a military airshow outside Riyadh in March was as important, if not more so, than the Dubai Airshow last November.

Saudi Arabia’s national investment strategy calls for $7 trillion in investment over the next decade, and the sectors of manufacturing, renewable energy, transport and logistics, tourism, infrastructure digital and health should be the subject of great attention.

Aljawini said AIN last year, the airline would help Saudi Arabia reach a target of 100 million tourists a year, modeling itself on Etihad Airways, Emirates or Qatar Airways. In May, Saudi tourism officials announced plans to spend $1 trillion over the next decade to achieve this goal by 2030.

“The ‘new airline’ model was advice from professional consultants to advise on whether Saudia could be saved, concluding that it had too negative an image to compete with Emirates or Etihad. Mixed feelings remain within the PIF as to whether the new investment is sound,” the lawyer said.

The perception is that the existing flag carrier has failed to match the range and quality of service of the “big three” Middle Eastern air carriers. However, with a fleet of over 150 aircraft, including over 90 jumbo jets, it’s too big to ignore. Low-cost carriers Flyadeal and Flynas are engaged in building their fleets and are successful both domestically and regionally, but have yet to reach an international scale. Between them, the three have 130 planes on order, but only three of them are jumbo jets.

“Saudia was, as I heard, asked to move its headquarters from Jeddah to Riyadh, which it resisted; hence a high-level internal decision to reallocate Saudia solely for Hajj and replace it for all other purposes with a new airline modeled after Emirates,” the lawyer said. AIN Last year. “It’s been quiet for the past few months, although there’s no reason to believe that doesn’t remain the plan.”

In addition to tourism, Islamic pilgrimage should also attract attention. By 2030, Hajj and Umrah events are expected to attract 30 million tourists a year. The PIF said in a strategy document that it had teamed up with other investors to acquire a 55% stake in the French company AccorInvest, which owns and operates hundreds of hotels around the world, mainly focused on the Europe, in 2018.

Technical know-how is also on the rise in the country. Saudi Arabian Military Industries has signed memorandums of understanding with defense contractors Boeing, Lockheed Martin, Raytheon and General Dynamics. He has also signed joint ventures with what he calls “leading global companies”, including the American L3 Harris, the Belgian CMI and the French group Thales.

Discussions about the new airline have generated great interest on Internet pilot forums. “[De facto ruler, Crown Prince Mohammed bin Salman] plans to transform Riyadh into a global hub by 2030,” said a poster on a forum. “When it comes to East-West connectivity, the nation is a sleeping giant. Imagine how much revenue 1-2% of passengers traveling annually between West and East will generate in 2030 when more than 25% of the world’s population will be Muslim.

Aljawini said a number of salient challenges faced the Saudi air transport sector as a new airline was considered. “What will make it or break it is to meet the challenges of modernizing the infrastructure of our international airports in a timely manner to meet the expected future increase in air traffic,” he said. . “This air traffic is expected to be generated by the formation of the new airline, other Saudi-based airlines and international airlines.”

Saudi Arabia has four international airports in Riyadh, Jeddah, Dammam and Medina. Aljawini calls for a change in the revenue models these airports use. A preferable revenue framework was one that was not only associated with a reduction in airport charges and levies, but also encompassed the formation of a number of other revenue-generating outlets designed to minimize the impact on airport results. an airline or on the passenger’s budget. traveling through Saudi international airports, he said.

“I believe that such a best practice business model should be reviewed by the relevant authority and executed as soon as possible with the aim of enhancing the competitiveness of Saudi Arabian international airports against other international airports in the region,” he said. he concluded. “Right now, changing the business model is a necessity, not a luxury.”