Saudi Arabia’s 2030 passenger target is a hard climb

SPA

Time certainly flies in the airline industry. While many of us are looking forward to the summer and airlines are already planning their Winter 2024/25 programmes, we are nearly half way through the decade – frightening.

We are also almost half way towards the ambitious Vision 2030 target of achieving 300 million passengers passing through Saudi Arabian airports. But is the kingdom on track to meet its airborne targets?

Total Saudi Arabian passenger volumes were around 107 million in 2023, which includes a record 64 million international passengers – a 37 percent jump on 2022.

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Domestic volumes “only” increased by 17 percent, making 2023 a record year for passengers passing through the kingdom.

Nevertheless, achieving the 300 million mark remains a tough ask in a market where competitive pressures, tight aircraft supply chains and staff shortages will remain through the rest of the decade. 

No major established aviation market has ever delivered over 20 percent growth per annum over such a time period. But I expect that will be more of a challenge than a deterrent to the Saudi government. 

To meet its targets, the kingdom will need to grow its international capacity and also attract more international airline capacity as part of its mix. Saudi Arabia has certainly made progress but has it made enough to be confident? 

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Middle East destinations account for over 60 percent of all airline demand within Saudi Arabia. The kingdom’s second largest market is South Asia, followed by North Africa. 

Collectively those three regional markets account for some 85 percent of all demand. This is a pretty usual characteristic for any market but does raise the question around future long-haul growth. How does Riyadh plan to connect to some 250 overseas destinations in time for 2030?

There are 27 active airports in Saudi Arabia with scheduled flights filed for this summer, so there is certainly scope for plenty of new services to those smaller unserved airports from within the Middle East region. 

Such moves will certainly help but realistically those new markets will only offer low-frequency weekly services.

This suggests that the real growth has to come from a combination of the “Big Three” airports, frequency growth and new markets.

Increasing international connectivity

A look at year-on-year performance provides some optimism for growth and highlights how the Air Connectivity Programme (ACP) in Saudi Arabia is working to date. 

In September 2023, there were 205 routes operated from the kingdom and this September there are 182 – a loss of some 23 airport pairs. 

Issues in bi-lateral relationships with Sudan have resulted in the dropping of all flights between the two countries, while services from Riyadh to Kuala Lumpur are perhaps a more commercial loss than political.

Many of those lost routes were low-frequency operations and will hardly concern anyone.

Across the 10 largest airports in Saudi Arabia there will be more flights this September than last year, with Tabuk (+31 percent) and Madinah (+24 percent) leading the way with very strong growth. 

Interestingly, in percentage terms, Jeddah currently only has a 5 percent increase in flights set for September, which amounts to around 18 new flights a day year on year.

This could mean Jeddah will trail Riyadh and Madinah as the market develops further. 

This September there will be 71 international airlines operating to Saudi Arabia – the same number as in 2022, although there has been some churn in the names.

The big wins have been airlines such as China Eastern and China Southern, who join Air China in launching services to the kingdom – delivering a political and aeronautical step change. 

Other wins include LOT Polish Airlines, Air Peace from Nigeria and Air Senegal with a once weekly service, all of which will probably have received commercial support from Saudi Arabia’s ACP schemes. 

Egyptair, Qatar Airways and Turkish Airlines have all added significant increases in year-on-year capacity as the market recovers.

Incoming shuttles?

The single largest step change that could materially change the rates of growth would be the opening of near shuttle type services between Riyadh and Dubai rather than the relatively typical low frequency on offer from Emirates (three per day), FlyDubai (five per day) and Saudia (six per day). 

I’m sure both Emirates and FlyDubai would love to increase frequency to Saudi Arabia but this move could entice connecting traffic away from Riyadh and harm the country's 2030 Vision.

So, half way through the decade, there is a long way to go for the Vision 2030 targets to be achieved.

The likelihood is that, even with the best efforts, the target will be missed. A combination of capacity supply, infrastructure delivery, increased competition and resources will weigh against Saudi Arabia’s aviation market in the coming years. 

However, even just achieving half of its target would be a remarkable rate of growth. In summary, there’s good progress to date but lots of work to be done.

John Grant is partner at UK consultancy Midas Aviation