While the aircraft is wearing Riyadh Air colours, CEO Tony Douglas confirmed that the jet will not actually join the Riyadh Air fleet, as those aircraft deliveries are not scheduled until 2025. With a US registration, the jet flew over prominent landmarks in Riyadh such as the King Abdullah Financial District, the Boulevard and over multiple towers located in the city.
Boeing will soon transfer this aircraft to Paris to take part in the 54th Paris Air show, starting next week – an important trade event for the global aviation sector, and a chance to highlight the recent landmark Boeing-Saudi aircraft deal.
As a nation, the increasing travel demand by a predominantly young Saudi population is enough to justify aviation sector growth — the air transport market in Saudi Arabia is forecast to grow by 126% in the next 20 years. An expanding middle class and a strong demand for commercial air travel continue to make the Middle East a key market for global airlines and investors. The introduction of new technologies, such as biometric identification, autonomous vehicles, and the use of artificial intelligence is set to transform the way people travel in the region, while major infrastructure projects, including new airports and rapid expansion of existing airport hubs, are set to boost capacity.
Riyadh Air, the new Saudi state-owned start-up, plans to replicate and then build on the successes of its Gulf neighbours who diversified oil & gas-based economies by becoming global, liberalised aviation hubs, leveraging the geographic position of the Middle East between Europe, Asia, and Africa. It’s a way to join the world’s map as a global destination hub whereby passengers flying long-haul are essentially forced to stop over, — encouraging tourism, business, and development.
While the trends demonstrate that demand for international air travel is increasing for the Saudi population, the Saudi aviation strategy outlined at the ICAO UN General Assembly in October 2022 was clear: “The goal is for Saudi Arabia to become a global transit hub” with the launch of a “new carrier” (now branded Riyadh Air) and it’s here that Riyadh Air enters an increasingly crowded and competitive market against Emirates based in Dubai, Qatar Airways in Doha, and Turkish Airlines in Istanbul, in the battle for transit passengers.
However, in media appearances over the last few weeks, the direction and priority of Riyadh Air seems to have shifted more towards a model focused on connecting the world to Saudi Arabia (aka point to point) as stated by the CEO Tony Douglas, who resigned from neighbouring Etihad Airways of the UAE to join the new Saudi airline project.
If transit is indeed the focus, the way in which the new Saudi carrier plans on taking a slice of the transit market is very much still in the works — but we’ve already heard that the airline plans on attracting passengers with brand-new aircraft, luxurious premium cabins, an emphasis on Saudi hospitality, and an aggressive tourism campaign to encourage stopovers in the kingdom.
As airlines grow and expand for the first time since the pandemic, the rise of efficient point-to-point and ultra-long-haul flights will also present a challenge to any new airline joining the long-haul scene. Several established major airlines are already luring passengers away from the traditional stopover concept by offering an alternative: Ultra-long haul, non-stop flights with new comfortable cabins (such as Australia’s Qantas, and Singapore Airlines). Qantas will soon launch Sydney-London non-stop, the famous “kangaroo route” and Singapore Airlines is already making money on its ultra-long-haul Singapore-New York service.
The Middle East, but particularly the Gulf, is a region where passengers are spoilt for choice when flying long-haul. We only need to look to Abu Dhabi’s Etihad Airways (which was declaring multiple-billion-dollar losses a year before the pandemic), along with the lack of strength evident in Oman Air and Kuwait Airways’ business models to see why not all Gulf carriers go on to be successful, despite ambitious visions to do so. But with excitement surrounding a clearly energised new Saudi carrier, the momentum is picking up over the prospect of another major Gulf airline.
Riyadh Air has ordered Boeing 787-9 jets, consistent with its goals of operating as a transit hub carrier. But the next aircraft order (which CEO Tony Douglas says is coming soon) is likely to provide more insight into the airline’s priorities, and if the focus is to build capacity to compete with Emirates and Qatar for passenger numbers, or if it’s perhaps able to do things a little differently, with the likes of an A321XLR fleet, for example, which could suggest a more modest, efficient route network targeting secondary cities far-and-wide.
Air travel demand remains incredibly strong, and the strength is predicted to stay for the foreseeable future. Airlines worldwide are on course for near-record revenues of more than $800bn this year, according to the aviation sector trade body IATA, which doubled its industry profit forecast for 2023 to almost $10bn.
IATA’s director general, Willie Walsh, denied that fares were excessive despite the upgrade in the financial outlook. He said profit margins remained “wafer thin” and blamed airline suppliers for increasing costs. After industry losses of $183bn in the pandemic years, Walsh said airlines were “en route to a profitable, safe, efficient and sustainable future”.
People were flying despite economic uncertainties, he said, with the latest data showing passenger traffic down by less than 10% on 2019 levels.
Airline industry operating profits are expected to reach $22.4bn in 2023, much improved over the December forecast of a $3.2bn operating profit. It is also more than double the $10.1bn operating profit estimated for 2022. 4.35bn people are expected to travel in 2023, which is closing in on the 4.54bn who flew in 2019.
In the Middle East, the region’s return to profitability in 2022 was supported by a significant increase in the passenger load factor of almost 25 percentage points, outstripping the performance of the other regions. At the same time, Middle East carriers have been swiftly rebuilding their international networks and in March 2023, the region’s international connectivity had returned to 98% of its pre-Covid level.
It’s not yet known exactly which destinations Riyadh Air will fly to, but there are plans for the airline to operate to a network of “more than 100 destinations” by 2030, serving destinations in the Middle East, Asia, the US, Africa and Europe – perhaps alongside existing routes operated by Saudia, the kingdom’s existing national carrier.
The author is an aviation analyst. Twitter handle: @AlexInAir
