FLY HIGH

Saudi Arabia 2014 | TRANSPORT | VIP INTERVIEW

TBY talks to Faisal Ghazi Kayal, Managing Director of Saudia Private Aviation, on its growth in the private jet sector, and plans for an IPO.

How has Saudia Private Aviation (SPA) gone from being a part of Saudi Arabian Airlines to today being a separate company on the verge of privatization?

Since the 1970s, there has been a strong relationship between global GDP and the number of passengers. Our industry tends to automatically move in line with macroeconomic trends. The aviation industry worldwide contributes approximately 3.4% to average global GDP. And this is around the same ratio that the aviation industry contributes to Saudi Arabia. Obviously, the Middle East's GDP growth is around 7.9%, most of which comes from Saudi Arabia and the Gulf countries in the Middle East. The industry employs roughly 300,000 people, directly or indirectly. The nice thing about our industry is the fact that it provides good jobs and a good quality of life for employees considering the fact that, with a high school degree, you can be a co-pilot or an aircraft mechanic with a very good starting salary. Basically, in terms of contribution to the economy, we generate about SAR53 billion per year. Private aviation has become a part of these statistics. There were 15,700 private aircraft worldwide in 2010 and that figure is expected to double, reaching 30,000 aircraft by 2020. That is a CAGR worldwide of about 6.9%. In the Middle East, out of that 15,700, there are roughly 400 aircraft, and 60% of those 400 are linked to the Saudi market. In that regard, the Saudi market here is considered to be a big player in private aviation. The private aviation business in Saudi Arabia consists of five key segments: the Royal Family, corporates, government officials, travel agents, and brokers. As far as privatization goes, we are one of the strategic business units of Saudi Arabian Airlines. The whole objective of having an investment business unit as part of the privatization project that took place at Saudi Arabian Airlines was to overhaul the company from an organizational and financial point of view, with the eventual objective of becoming fully efficient with a private company mentality. Eventually, we would like to go and participate in an IPO. SPA is not just a company, but the largest operator of Dassault Falcons in the region. At the same time, we have a good share of the domestic market via our small, six-seat aircraft. This aircraft addresses the dynamic lifestyle of the new businesspeople of Saudi Arabia.

How will the new airports coming online affect your business?

As a matter of fact, it will complement our strategy because, basically, infrastructure is considered to be the bread and butter of our business. SPA's new fixed-base operator (FBO) in King Abdulaziz International Airport in Jeddah is a good example of this infrastructure. We have full-sized lounges and complete facilities that include a boutique hotel for flight crew. Infrastructure is a strong foundation for future growth. Likewise, the new King Abdullaziz International Airport, with all of its new facilities, will be very positive for all the operators around the airport. Airports usually come with highway and transportation improvements, and we are going to take advantage of this improved accessibility.

“The strategic plan is developed based on four key perspectives: financials, customers, processes, and our staff."

What distinguishes you from your competitors?

It all starts with the fact that we believe in ourselves and what we can offer to our customers. This is something I can say on behalf of every single member of the SPA family. From an IT perspective, we restructured completely. For example, we redesigned our website in order to improve usability. Users will soon be able to request a quote over the internet and receive our response quickly. We have also rebranded ourselves and our image. We have come up with a totally new loyalty program. We have introduced three tiers: silver, gold, and platinum. The silver tier is 25+ hours and targets customers whose travel behavior means they usually only move within Saudi Arabia, taking short-haul flights. For gold, we target clients whose average tends to be short-to-medium, and the platinum membership offers you all varieties from medium- to long-haul flights. And the story doesn't end there; there are a lot of things in the pipeline. We believe we have to keep renewing ourselves and our products to stay innovative and competitive.

How has the governance structure within your organization changed since privatization began?

We have seen the results at some of our sister companies, which were fortunate enough to start the process earlier than most. We have also seen how their culture and processes have changed. The transition from a government entity into a private entity takes a lot of courage, because you have to change your mindset and culture. Many aspects need to be adjusted to this new atmosphere. Our sister company's customers have noticed the changes, and the same can be said about us. We have noticed our efficiency rating improving, and we have become more customer-oriented and focused. We tend to develop all of our strategies around meeting customer expectations. The strategic plan is developed based on four key perspectives: financials, customers, processes, and our staff, who are the most precious asset in this organization. We try to develop our annual corporate plans with a clear mix of initiatives through different perspectives, and those initiatives are measured by key performance indicators (KPIs), where everyone from the upper and middle level management understand those KPIs and have clear targets. Internally, we have developed a dashboard through which we can log on and capture our revenue and cost in real time whenever we want. If it hadn't been for the privatization and this change of culture, this would not have been the case.

Where do you expect to see the firm by 2020?

I think our two successes are our customer satisfaction and the fact that we can meet our shareholders' expectations from a commercial point of view. Success, for us, is being able to grow with the market, being able to compete, and being able to adapt to change. I think we have geared up with a lot of analysis and a lot of groundwork taking place during the last several months to come up with a strategic plan that will ensure our position in 2020. Our strategic plan counts on our ability to diversify our revenue avenues. That includes maintenance, repair, and operations (MRO), ground handling, expanding the chartering business, aircraft management, and eventually providing elite shuttle services between key cities in Saudi Arabia and the region. That is very much in the pipeline at this stage, but it will be a semi-scheduled entity in the future.

© The Business Year - June 2014