BUDGET AIRLINES TAKE TO THE SKIES
The Kingdom's Vision 2030 is already ushering changes. Local air carriers are opening or expanding their low-cost segments en mass, while regional carriers are being granted licenses one after another to operate in the country.
Saudi Arabia's prime low-cost carrier, Flynas, stunned the industry on January 16, 2017 by confirming its purchase of 80 new aircraft from European manufacturer Airbus. In a deal worth USD8.6 billion, the airline placed an order for 60 new A320neos, and upgraded its existing order of a further 20 A320 narrow body jets to the new model.
The deal, which in LCC terms is only rivaled by FlyDubai's USD11.4 billion purchase of 111 Boeing aircraft back in 2013, will likely prove a game-changer for the Saudi carrier as it looks to expand its existing fleet of 29 leased A320s. In fact, once delivery commences, scheduled throughout an eight-year period starting 2018, Flynas will boast one of the largest budget airline fleets in the Middle East.
Speaking to TBY days before the deal was made official, the airline's CEO, Paul Byrne hinted, “We are close to the end of the process with Airbus to buy a total of 100 aircraft. This is split between 60 aircraft coming in over the next 10 years and options for the other 40 aircraft." And while Byrne insists, “Flynas still sees itself as a regional airline," the breakthrough deal will certainly allow it to spread its wings to an ever-growing list of fresh destinations in and around the Middle East.
Yet it is within its own primary market, Saudi Arabia, which accounts for 70% of the airline's traffic, that Flynas is bracing itself for stiffer-than-ever competition. In 2016 the Kingdom's aviation sector encountered its most dynamic year in recent history, as a number of low-cost carriers look to disrupt existing market forces.
Namely, Dammam-based SaudiGulf Airlines was granted a license for domestic flights in June 2016, shortly followed by Nesma Airlines, which though Saudi-owned, is headquartered in Cairo. In addition, the local industry is bracing for another newcomer to enter the market, with the news that national carrier Saudi Arabian Airlines (Saudia)—the Middle East's second biggest—would launch its own LCC. By 3Q2017 the newly formed Flyadeal is expected to hit the skies, with a fleet target of 50 aircraft by 2020.
Byrne points to the fall in oil prices as the key factor for this surge. “Typically with a drop in oil prices, planes that were sitting idle are more viable, and, as a result, we have been inundated with competition."
Yet to truly understand the boom in Saudi's aviation sector, one ought to analyze the vast reforms introduced by the government, principally through Vision 2030. Amongst its key initiatives lies the aim to drastically boost its Hajj and Umrah industry by increasing the number of visitors from 8 million in 2016 to 20 million by 2020 and 30 million pilgrims by 2030.
As pointed out by the Mayor of Mecca, Osama Al-Bar, in an interview with The Business Year, “With the completion of the new King Abdulaziz International Airport in Jeddah, with an annual capacity of 34 million travelers, bringing visitors here should be much easier. There are more airlines coming, and visa issuance has recently been eased for visitors, businessmen, and tourists, especially from Islamic countries." In other words, Saudi Arabia's unique religious tourism industry is expected to swell beyond recognition, presenting a huge opportunity for emerging budget carriers.
For its part, Flynas has already played an integral role in transforming air travel in the Kingdom by going beyond Saudi's three major cities and introducing fresh routes to smaller towns such as Abha, Bisha, and Tobuk, or as Byrne put it “by getting the everyday commuters and travelers off the road and into the air."
While newcomers will be keen to tap into this booming market, the airline's recent performance suggests it is only just taking off. Namely, buoyed its success of first turning a profit in 2015 and 2016, Flynas spectacularly followed its announcement of the Airbus purchase to suggest—on the same day— that it is seeking regulatory approval for an IPO in mid-2017, thus becoming the first airline to be listed on the country's stock exchange.
BUDGET AIRLINES TAKE TO THE SKIES
TABLE OF CONTENTS
Column
YB Pehin Dato Lim Jock Seng, Minister at the Prime Minister’s Office & Second Minister of Foreign Affairs and Trade, Brunei
TBY talks to YB Pehin Dato Lim Jock Seng, Minister at the Prime Minister's Office & Second Minister of Foreign Affairs and Trade, Brunei, on the sector.
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A Crude Awakening
The Kingdom has made renewables a critical aspect of its ambitious Vision 2030 effort to diversify its economy and wean itself from a strictly carbon-based diet, not to mention empower local businesses and individuals to take up the mantle and lead the energy sector into the next generation.
read articleInterview
Abdulaziz AbdulKarim, Vice President of Procurement & Supply Chain Management (PSCM) , Saudi Aramco,
TBY talks to Abdulaziz AbdulKarim, Vice President of Procurement & Supply Chain Management (PSCM) at Saudi Aramco, on the IKTVA program, supporting local content, and looking back over a successful year.
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Ayman Abdullah Alfallaj, CEO, Thiqah
TBY talks to Ayman Abdullah Alfallaj, CEO of Thiqah, on how the private sector can keep pace with the speed of public reforms, delivering a strong and lasting value proposition, and integrating the fruits of privatization into the public sector.
read articleFocus: Technology Investments
Investment Calling
A technological revolution is underway in the Kingdom. Already one of the most tech-savvy nations in the Middle East, the Saudi market has long sought a thriving domestic technology and innovation scene. And with Vision 2030, it is on course to deliver just that.
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A Hejaz Unhindered
An ambitious series of road and rail projects from the Jordanian border down to the Indian Ocean are slated to open in part before the end of 2017. They bring the Kingdom that much nearer to its goal of greater non-carbon-based economic integration with the world.
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Sulaiman bin Abdullah Al-Hamdan, Former Minister of Transport and Minister, Civil Service
TBY talks to Sulaiman bin Abdullah Al-Hamdan, Former Minister of Transport and current Minister of Civil Service, on an attractive legislative framework for investment, railway linkages, and port developments.
read articleInterview
Rumaih M. Al-Rumaih, President, Public Transport Authority (PTA
TBY talks to Rumaih M. Al-Rumaih, President of Public Transport Authority (PTA) & Acting President of Saudi Railway Organization, on teaming up with commercially committed partners, making sure the Kingdom's land and sea bridges are of the first order, and providing employment for all the Kingdom's inhabitants.
read articleInterview
Nabeel M. Al-Amudi, President, Saudi Ports Authority, and Minister of Transport
TBY talks to Nabeel M. Al-Amudi, Minister of Transport, and President of Saudi Ports Authority, on optimally restricting concession agreements, resolving bottlenecks in the logistics chain, and privatizing as rapidly as possible.
read articleInterview
Khaled Bin Abdullah Al Hogail, CEO & Managing Director , Saudi Public Transport Company (SAPTCO)
TBY talks to Khaled Bin Abdullah Al Hogail, CEO & Managing Director of the Saudi Public Transport Company (SAPTCO), on the importance of strong and rational regulations, knowledge transfers, and unifying public and private transportation networks.
read articleInterview
Imad El-Zein, CEO, Auto World-Sixt Saudi Arabia
TBY talks to Imad El-Zein, CEO of Auto World-Sixt Saudi Arabia, on growing market share in challenging circumstances, partnering with world-class players to boost its local presence, and combining better services with lower costs.
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Saleh H. Al-Ghamdi, Acting CEO, Saudi Air Navigation Services Company (SANS)
TBY talks to Saleh H. Al-Ghamdi, Acting CEO of Saudi Air Navigation Services Company (SANS), on maximizing safe and effective services, effectively increasing the rate of Saudization, and easing the pathway of women into the workforce.
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Khalil Kutubkhanah, CEO, Jeddah Development and Urban Regeneration Company (JDURC)
TBY talks to Ibrahim Khalil Kutubkhanah, CEO of Jeddah Development and Urban Regeneration Company (JDURC), on Jeddah's unplanned settlements, the company's redevelopment projects, and its partnership model with the private sector.
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Dr. Khalid Bin Mohammed Al Shaibani, Deputy Minister, Planning and Health & Director of the Vision Realization Office
TBY talks to Dr. Khalid Bin Mohammed Al Shaibani, Deputy Minister for Planning and Health & Director of the Vision Realization Office, on reforms within the Ministry of Health, the corporatization of healthcare provision, and transformations in care delivery.
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Mohanad A. Dahlan, CEO, University of Business and Technology (UBT) Company
TBY talks to Mohanad A. Dahlan, CEO of University of Business and Technology (UBT) Company, on the evolution of the company, education investments, and upcoming sectors that will need support from the sector.
read articleFocus: Universities
Broad and Deep
As part of the continuing decentralization of higher education in Saudi Arabia, individual universities are pursuing their own paths to grow their faculties, engage with various international stakeholders, and ultimately move toward a more privatized future.
read articleInterview
Rafique Izhiman, Area General Manager KSA Jeddah, Yanbu Hotels
TBY talks to Rafique Izhiman, Area General Manager KSA Jeddah/Yanbu Hotels & General Manager, Intercontinental Hotel Group (IHG), Jeddah, on the role the firm plays in the market, expanding its footprint in the country, and expectations for 2017.
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