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Challenges faced by Riyadh Air as aviation’s bold, new disruptor

Assessing the risks of launching a new, international airline in the current market

Riyadh Air Boeing Riyadh Air
Front row: Riyadh Air CEO Tony Douglas (left) and Boeing SVP commercial sales and marketing Brad McMullen. Back row: PIF's governor Yasir AlRumayyan (left), Saudi Arabia's US Ambassador Princess Reema Al Saud and Boeing CEO Dave Calhoun

The secret is out: Saudi Arabia’s Riyadh Air will launch with an ambition to serve some 100 destinations by 2030, connecting the capital Riyadh to Asia, Africa and Europe.

Straight off the back of that announcement is an order for 39 Dreamliner B787s, with a value of around $19 billion and delivery from 2025 onwards.

It’s bold and disruptive news, but is this the right time for such a new airline?

The case for economic diversification

The objectives for Vision 2030 are sound: ease the reliance on an oil-based economy, create a background for increased trade and tourism, and reposition Saudi Arabia as the market leader in the Middle East.

Embarking on such an ambitious journey in the middle of a global pandemic has been tough (as the data reveals).

Key metrics for Jeddah and Riyadh, summer 2019 versus 2023

Jeddah 2019Jeddah 2023Riyadh 2019Riyadh 2023
Scheduled airlines operating67543943
Destinations served18915085105
Scheduled flights65,31470,80057,16163,555
Scheduled seats14,418,48015,824,66311,170,08112,594,865
Source: OAG Schedules Anayser

Jeddah has seen a reduction in the number of airlines operating scheduled services since the pandemic with the loss of notable “trophy” airlines such as British Airways.

However, their replacement by airlines such as Flynas and Qatar Airways perhaps reflects the direction of travel in the broader regional market.

Riyadh appears to have fared better with more airlines operating, more destinations served, more flights and seats – all of which are pointers to a growth market before any Riyadh Air initiative. 

An IATA assessment of the UAE aviation market in 2017 – before the pandemic, but equally before a massive injection of demand from Russia in the last 12 months – suggested that aviation accounted for $47.4 billion of value to GDP, supported some 770,000 direct and indirect jobs, and accounted for 13.3 percent of GDP. 

A wider evaluation of the sector’s value in the Middle East a year later identified 3.3 million jobs, $213 billion of economic activity and 7.6 percent of all GDP activity in the region being attributable to aviation.

In this context, when a country is looking to diversify away from an oil-based economy, it’s no wonder aviation becomes a focus activity.

Saudia cannot perform the role of Riyadh Air

Part of the ambition and vision for Riyadh Air is linked to the repositioning of the kingdom as market leading, innovative, service and quality focused.

Few would link these descriptions with the current Saudia operation which for too many years has struggled with its identity, purpose, and brand values.

But that’s not to say that there is not a role for the current national carrier. 

For Saudia, focusing on Jeddah, local market demand and year-round flows of religious traffic makes sense.

It retains the historic brand, allows an opportunity for a fresh start, and stops the airline struggling to build hub networks in both Jeddah and Riyadh.

If Saudia focuses on Jeddah, then there will be enough opportunity for the coming years. And with their own order for B787s, a new fleet will give them opportunities for further growth and just maybe a glimmer of profitability over time. 

What Riyadh Air will look like

Imagine “Emirates plus” and that will give you an idea of the ambition and expected direction of the airline.

Starting from fresh means an opportunity for brand new aircraft, state-of-the-art passenger facilities and services, competitive frequent flyer schemes and all of the trappings of a luxury carrier – promoting the Saudi Arabia brand to over 100 destinations by 2030. 

The B787 order is just the beginning of the plan. If Riyadh Air is to compete successfully then an order for a single aisle medium to long range aircraft such as the A321 XLR can be expected to perfectly fit the two-to-six-hour flight range.

Serving the domestic markets of Saudi Arabia will be just as crucial as the international ambition, especially when connecting traffic will be important in the early years and those markets certainly will not need B787s.

Accepting that a domestic network of some sorts is a “must have”, then selection of international markets to serve will be crucial, especially in the early stages.

Purely serving South East Asian markets but not serving Europe would create no connectivity, and therefore getting that balance right will be vital and may prove challenging.

Top 20 International destinations from/to Riyadh

Destination (two-way bookings)2022
Dubai International1,708,061
Cairo International1,363,872
Dhaka696,560
Amman Queen Allia International399,843
London Heathrow378,846
Manila Ninoy Aquino353,076
Kuwait347,886
Delhi343,388
Khartoum International322,001
Islamabad International304,848
Lahore260,654
Mumbai253,553
Beirut227,897
Istanbul216,544
Sharjah216,517
Bahrain200,060
Hyderabad Rajiv Gandhi (IN)185,354
Cochin KL180,046
Peshawar146,640
Alexandria Borg el Arab145,974
Source: OAG Traffic Analyser

The table above reflects the 20 largest international markets from Riyadh in 2022 and only one of those (London Heathrow) is in Europe, while eight are within the Indian subcontinent.

Riyadh’s largest single market is Dubai, which is already oversubscribed with some six airlines already serving that route.

Destinations such as Paris, Singapore, Hong Kong and New York will inevitably be added to the network quickly but probably not at a daily frequency.

Launching any new airline is a high-risk investment, but launching in a market that is already quite mature makes that challenge even harder.

For Riyadh Air, the linkage to the wider Vision 2030 project will make or break the success of the plan.

John Grant is partner at UK consultancy Midas Aviation

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