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Saudia aims low for a high return

Posted 3 January 2018 · Add Comment

Saudi Arabia’s national carrier, Saudia, is going on the offensive with a huge expansion campaign and the launch of its own low-cost carrier. Alan Dron reports.

Often forgotten when outsiders look at the airline market in the Gulf, Saudia is one of the region’s major carriers. It is undergoing a major transformation plan to re-equip its fleet and is positioning itself not only to fight off ever-growing competition but also to expand in its own right.
One indicator of its rapid expansion can be seen in its passenger figures. At present, the airline flies close to 30 million travellers annually. By 2020, just three years from now, it is confident that figure will have grown by 50%, to 45 million, said Saleh bin Nasser Al-Jasser, the Saudi Arabian Airlines’ director-general.
Those additional passengers will be carried by a rapidly expanding fleet, he explained at Airbus’ Finkenwerder assembly plant in Hamburg, Germany.
Speaking as he accepted the first Airbus A320ceo for the group’s new low-cost carrier, Flyadeal, he noted that when Saudia started its ‘transformation plan’ in 2015, it operated 117 aircraft. By the end of 2020, that figure will have grown to 200. It received no fewer than 28 new aircraft in 2016 and plans to take a further 32 into its inventory this year.
At the same time, it is retiring older types such as its 15 Boeing 777-200ERs. By the end of the decade, it will have one of the youngest fleets in the region and intends to use it both to expand its route network and increase frequencies to its existing destinations.
Among the new types that have joined the fleet in the past couple of years are Boeing 787-9s, of which it has eight on order, plus the Airbus A330-300R (for ‘Regional’), a high-capacity, shorter-ranged version of the A330-300, which it uses on major trunk routes on its network. Compared to earlier versions of the A330-300, which fly with 288 or 298 passengers in Saudia service, depending on internal configuration, the ‘R’ has capacity for 330, partly through a smaller business class cabin (30 seats as opposed to 36). The airline is close to accepting the final aircraft in its order for 20, which it placed at the 2015 Paris Air Show.
The airline’s growth is being mirrored by major investments in the country’s airport infrastructure. One of the most important facets of this investment is a new passenger terminal at Jeddah’s King Abdulaziz International Airport, which is due to open in early 2018 and which will be “a major milestone” for Saudia. That will give the airline the capacity to take its fair share of the region’s traffic, said Al-Jasser.
It is often forgotten that a major component of Saudia’s traffic is domestic. Before the arrival of local newcomers such as Saudi Gulf and Nesma, it was reckoned to take 90% of internal flights, with hybrid carrier Flynas taking the rest.
That domestic traffic, thought to be growing at around 6% annually, is believed still to have considerable untapped demand. It will be one of the foundations for the national carrier’s growth in coming years, although Al-Jasser was careful to say that Saudia would be pursuing growth in all three segments of its passenger market – domestic, regional and long-haul.
One intriguing potential aspect of Saudia’s future domestic growth is the acquisition of turboprop aircraft. “Turboprops can be a solution for short domestic routes,” noted Al-Jasser, but no decision had yet been taken on whether to procure them, he said. He noted that one carrier, the Saudi-Egyptian carrier Nesma, was using ATR 72-600 turboprops out of the regional centre of Hail.
There are also plans to create a south-western hub at Abha, but this is an initiative by the General Authority for Civil Aviation, the Saudi Arabian regulator, rather than Saudia, said Al-Jasser.
On the human side of the company, as part of its transformation programme, Saudia is working to improve on-board service standards in a region where these are already formidably high. Those efforts appear to be paying off. “We’re receiving a lot of compliments on the improvements,” said the director-general, who noted with visible pleasure that Saudia had been named ‘most improved airline’ in the authoritative annual Skytrax awards, which measure airlines’ quality over a wide range of parameters.
Saudia has two specific niche operations not found in many other airlines – flights catering for the annual Haj pilgrimage and a business class division, Al Bayraq, that taps into the huge demand for flights between the Saudi capital, Riyadh, and the country’s main commercial centre, Jeddah.
The national carrier has a major role to play in helping Moslem pilgrims fulfil one of Islam’s five basic tenets, the pilgrimage to Mecca. As well as carrying Haj passengers on scheduled flights, it operates charter services to help bring pilgrims in from all over the Islamic world and return them home at the end of their devotions.
This year, it has had around 21 aircraft dedicated to Haj charters, six or seven of them from its own fleet, with the rest of the necessary capacity leased in from other airlines.
“We do still lease in aircraft, but it’s less than we used to, because of our expansion,” said Al-Jasser. The charter business will continue, but as both the fleet and network expand “we will be able to meet a lot of the demand through our scheduled services”.
Al Bayraq puts Saudia in a very small club of carriers that operate all-business class aircraft. It operates only on the heavily trafficked Riyadh-Jeddah service and uses three Airbus A319s (two in service, with one on standby as a back-up) in a 48-seater cabin layout.
“It’s catering for a very niche market between Jeddah and Riyadh for people with very specific requirements.” Typical customers are businessmen and government officials.
“The volume of traffic between those two cities is huge and there’s a segment that, when we looked at our strategy in early 2015, we saw a market for this very niche product. It’s a different style.”
Al-Jasser said it was difficult to say whether Al Bayraq provided a more premium service than Saudia’s standard business class cabins, but it placed high emphasis on standards of food and overall service and: “It’s receiving an excellent perception from the market.”
Challenges for Saudia remain. “The biggest challenge is over-capacity in the entire region. Yields are already under pressure and we think this will continue for a few years to come.” Al-Jasser also accepted that Saudia is “definitely over-staffed” and was making efforts to become more efficient in this area. However, it was very difficult to set a target for staff numbers when the airline was growing so quickly, he said.

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