OAG says that the launch of Riyadh Air allows Saudia to focus on Jeddah and the religious markets to the city
For the past eight years, the Kingdom of Saudi Arabia has seen a massive change on the ground in different aspects of the country’s economy as part of the Vision 2030 launched by Crown Prince and de-facto ruler Mohamed Bin Salman, who has set ambitious targets for almost every industry, with the global objective of diversification of the Saudi economy and for employment generation in private sector.
As part of the Vision 2030, the aviation industry has been given a target of growing the annual number of air passengers, domestic and international, to 300 million by the year 2030.
In a report, aviation industry analysis firm OAG says that of the 300 million air passengers planned by 2030, 100 million will be tourists. It says that it is an extremely ambitious target considering that the current estimated passengers, both to and from Saudi Arabia, in 2023 is 107 million.
Having access to a domestic market of nearly 43 million passengers annually provides a solid platform for the total market. However, achieving that target will require levels of international capacity growth never seen in any market. To achieve the required volumes, demand will need to increase by over 20 pc per annum through to 2030, a level of growth three times higher than the average since 2010 through 2019 and the pre-pandemic levels. Such a sustained rate of growth has never been achieved in any major country market. OAG says that whilst the target is visionary, achieving such a number is becoming increasingly challenging as the aviation sector faces a series of supply challenges.
It adds that one of the fastest accelerators of growth is to launch a new airline alongside the existing locally based carriers. This leads to the launch of Riyadh Air and perhaps one or two other carriers that will finally be announced in the next few months. Riyadh Air has a hugely ambitious plan to connect the capital city to over 100 international destinations, potentially creating around 200,000 jobs. It has also placed an order for 39 B787s with the first deliveries initially expected in 2025, although Boeing’s ongoing production issues may result in the initial timescales being delayed.
Additionally, in November 2023, Tony Douglas, CEO of Riyadh Air had said that the airline was set to announce an order for narrow-bodied fleet. But, OAG says, the ongoing issues at Boeing, and to a lesser degree Airbus, appear to have disrupted this plan. Either with or without the narrow-bodied aircraft order, Riyadh Air is unlikely to be a significant capacity provider before the end of 2026 at the earliest, given the necessary ramp-up that any new airline encounters.
OAG says that the launch of Riyadh Air allows Saudia to focus on Jeddah and the religious markets to the city, along with commercial demand. It also probably means that Saudia will have to give up some routes to Riyadh, and perhaps even slots at constrained airports such as London Heathrow. The revised focus also places more emphasis on Saudia to operate profitably with a much clearer focus and business strategy, including the utilisation of the 39 B787s ordered in 2023.
It adds that with an almost “guaranteed” religious market to cater to, strong domestic demand, and an established regional market, it should almost be impossible for Saudia to fail. However, only time will tell if they deliver on that clearer market position. It says that alongside Saudia and Riyadh Air, other new airlines are under development in Saudi Arabia. Planning to launch later in 2024 is Neom Air, that is promising levels of service in line with visions for the wider development of the area. OAG says that Neom Air currently has no IATA designation and even more importantly no aircraft ordered, or announcements of any network plan, all of which makes a 2024 start look doubtful, says OAG.
It says that while aircraft can be leased at short notice, but the ongoing delivery issues have resulted in airlines extending current leases. Plus, given the high-quality service that Neom Air aims to deliver, retrofitting cabin interiors make that option seem unrealistic as well.
OAG says that besides the lack of availability of aircraft, a larger point is perhaps the availability of qualified staff to run the operational side of these enlarged airline operations. Whilst Riyadh Air aims to be digitally native, and Neom Air hopes to operate “innovative aircraft”, attracting a pool of qualified pilots with experience may be challenging.
Before the pandemic, forecasts predicted a global pilot shortage reaching nearly 35,000 by the end of the decade. Post-pandemic, that shortage has become more severe. Despite efforts to refuel the labour pipeline, it is taking longer than anyone could have hoped. All of which means airlines in Saudi Arabia are probably going to have to pay above market rates for experienced flight crews.
