Saudi Arabia plans to target international transit passenger traffic with a new national airline, going head-to-head with Gulf giants Emirates and Qatar Airways and opening up a new front in simmering regional competition.
Crown Prince Mohammed bin Salman, who is pushing economic diversification to wean Saudi Arabia off oil revenues and create jobs, has announced a transportation and logistics drive aimed at making the kingdom the fifth-biggest air transit hub.
Saudi Arabia’s ambitious Vision 2030 project aims to move the country away from its reliance on oil by developing other sectors of the economy. One of the notable goals of Vision 2030 is to attract 100 million tourists annually by 2030, six times the number that visited in 2019. This includes 30 million religious tourists each year.
“The comprehensive strategy aims to position Saudi Arabia as a global logistics hub connecting the three continents,” said Prince Mohammed. “This will help other sectors like tourism, Hajj and Umrah to achieve their national targets.”
Prince Mohammed is targeting an increase of non-oil revenues to around €10.1 billion by 2030.
The Prince is aiming to establish the Kingdom as a global logistic hub by developing air, rail, sea and road networks over the next 10 years. Officials aim to increase the transport and logistics sector’s contribution to gross domestic product from 6% to 10% by 2030.
It is reported that the new – as yet unnamed – airline will boost international routes and echo existing Gulf carriers by carrying people from one country to another via connections in the kingdom, known in the industry as sixth-freedom traffic.
The strategy marks a shift for Saudi Arabia whose other airlines, like state-owned Saudia and its low cost subsidiary flyadeal, mostly operate domestic services and point-to-point flights to and from the country of 35 million people.
The Saudi expansion threatens to sharpen a battle for passengers at a time when travel has been hit by the coronavirus pandemic. Long-haul flights like those operated by Emirates and Qatar Airways are forecast to take the longest to recover.
Riyadh has already moved to compete with the UAE, the region’s business, trade and tourism hub. The Saudi government says that from 2024 it will stop giving contracts to firms that do not set up regional headquarters in the kingdom.
Robert Mogielnicki, Resident Scholar at the Arab Gulf States Institute, said: “Commercial competition in the aviation industry has always been fierce, and regional competition is heating up. Some turbulence in regional relations is on the horizon.”
Dubai, the world’s largest international air travel hub, has announced a five-year plan to grow air and shipping routes by 50% and double tourism capacity over the next two decades.
Riyadh has already moved to compete with the UAE, the region’s business, trade and tourism hub.
Prince Mohammed is trying to lure foreign capital to create new industries including tourism, with ambitions to increase overall visitors to 100 million by 2030 from 40m in 2019. This includes 30m religious tourists each year, with religious travellers bringing in around €16.9bn to the economy in 2018.
Aviation Consultant Brendan Sobie said: “Saudi Arabia has the ability to push forward with its aviation and tourism strategy when others will be retreating and retracting; it is a risky strategy, but also sensible given its position and overall diversification objective.”
However, any airline requires substantial start-up capital and experts warn that if Saudi Arabia’s ambition is to compete on transit flights it may have to contend with years of losses.
Saudi Arabia’s large population generates direct traffic that could cushion losses as a new airline targets international transit traffic, according to Aviation Consultant John Strickland.
Emirates last month reported a record €4.6bn annual loss, with the pandemic forcing the state to step in with €2.6bn in support.