JEDDAH, 30 October 2006 — Saudi Arabia is fast heading for a new era in civil aviation services with the operation of two low-cost airlines. “Most of the Saudi investors who have applied for licenses to operate private airlines have opted for low-budget airlines,” says Abdullah Ruhaimy, president of the General Authority for Civil Aviation (GACA).
Ruhaimy was upbeat about the tremendous success achieved by low-cost airlines in Europe, America, Southeast Asia and some Arab countries. GACA will license two airline companies from the six applicants to operate domestic flights, Ruhaimy said, adding that one of the two would be based at the King Khaled International Airport in Riyadh. King Abdul Aziz Airport in Jeddah will be the main center of Saudi Arabian Airlines, he added.
Ruhaimy is optimistic about the new private airlines and said they would improve aviation services, providing air tickets at reduced charges, operating more flights, facilitating travel procedures and adopting modern technologies. He also pointed out that the licensing of the two private airlines was in the final stages.
Low-budget airlines is a relatively new venture in Saudi Arabia. The Sharjah-based Air Arabia, the first low-budget airline to operate in the Kingdom, started its flights to Riyadh, Jeddah and Dammam very recently. Air Arabia’s success story, however, has encouraged new private airlines such as Sama and National Air Services (NAS) to enter the promising market where at least 10 million people, including expatriates, prefer to fly low-cost.
The arrival of low-budget airlines are significant at a time when the industry is faced with significant economic challenges with rising costs and competition as more and more countries are adopting an open sky policy. Experts say low-cost airlines are the answer to the challenges faced by regional airlines.
Analysts believe that Sama and NAS would soon operate domestic flights in the Kingdom after obtaining license from GACA. With paid-up capital of SR200 million ($53.3 million), Sama intends to be the first low-budget airline in Saudi Arabia. With more than 40 wealthy individuals and some of the top-100 business groups on the list of its shareholders, Sama is getting ready to grab a considerable share of the market.
NAS — a leading regional private aviation company — decided to launch a low-cost carrier in Saudi Arabia as part of its business development strategy.
“The Middle East travel market is expanding at a rapid pace and Saudi Arabia continues to be a key player within it. The Saudi business sector has made tangible strides to liberalization. This is has been marked by the many successful initial public offerings (IPOs) taking place in Saudi Arabia and the growing privatization movement of different businesses including airline industry,” says Ayed Al-Jeaid, chairman of NAS.
Experts in the aviation industry are optimistic about lost-cost services. “This is a highly successful venture,” says Mohammed A. Hakeem, sales executive for Air Arabia in the Western Province in Saudi Arabia. “Low-budget airlines are a different concept. Its operating system is totally different from ordinary airlines,” he said, adding that low-cost airlines offer a fare that is 48 percent lower than that of other airlines. A 98 percent seat occupancy is required for such airlines to run profitably without losses.
There are many factors that make Saudi Arabia a promising market for budget airlines. Saudis traditionally love to travel and spend nearly SR60 billion ($16 billion) annually on domestic and international travel and tourism. According to the latest census in September 2005, Saudi Arabia’s population reached 22.67 million, including 6.14 million expatriates.
About 75 percent of the country’s expatriate workers earn low salaries of around SR2,000 ($533) monthly and would certainly opt for low-cost for traveling to their home countries. At present middle class Saudis as well as expatriates use Saudi Arabian Public Transport Company (SAPTCO) and private buses and taxis for long journeys. All these transport means are time-consuming.
“There is good demand for budget airlines,” says Abdul Jaleel Mangarathodi, reservation manager of Attar Travels in Jeddah. He said the increase in fare because of additional taxes would encourage people to fly budget airlines. Etihad Airways, the national carrier of Abu Dhabi government, is also operating low-budget flights to Saudi Arabia and other Middle Eastern destinations, he said. Etihad made tremendous strides within a short span as a result of its quality services at comparatively lower charges, he added.
