Saudi Arabia unveiled its new aviation strategy in May 2022, which aims to achieve 330 million passengers by 2030 as well as 4.5 million tons of cargo. This compares with about 100 million passengers in 2019 and 88 million achieved in 2022. The support for implementing this strategy will come greatly from the country’s public finances (including the sovereign wealth fund), which will enable the development of infrastructures and assets in this capital-intensive sector.
This strategy is broadly in line with that of some other Gulf countries in their bid to make their economies less dependent on oil. Trade and tourism are among the best enablers of such diversification, contributing directly to the country’s GDP as well as local job creation.
It is estimated that this level of passenger volumes by 2030 could require up to about 1,000 aircraft operated by airlines in Saudi Arabia, assuming that around 50 percent of this traffic is served by non-Saudi carriers. This compares with the estimate of about 250-300 aircraft currently operated by carriers in the country.
The Kingdom has a sizable aviation sector already, particularly compared with its population size. The country’s largest carrier, Saudi Arabian Airlines (Saudia) is the third largest airline in the Middle East, after Emirates and Qatar Airways. Key Saudi airlines include Saudia, Riyadh Air, Flyadeal, Flynas and Nesma Airlines. While Saudia is the legacy Saudi state-owned flag carrier with a long history, Riyadh Air is a recently launched state-owned airline, which placed orders for 39 Dreamliners (including 18 B787-9 and 21 B787-10 aircraft) in July 2023.
Commercial aviation ecosystem seems to be growing in Saudi Arabia with the development not only of airlines but also lessors. Avilease, a state-owned aircraft lessor which was formed about a year ago, acquired Standard Chartered’s aircraft leasing business recently and aims to become one of the top 10 lessors globally by 2030. Avilease has already undertaken a number of transactions for aircraft operated by airlines in the country.
Over 85 percent of passenger traffic flows through the three largest airports of the country. The country is developing a number of airports including in the massive investment-driven development of the Neom region, with another state-owned airline, Neom Airlines, which is in the process of starting up based out of Neom. In another example of the country’s coordinated approach to tourism, The Red Sea International Airport started operations in Sep-23 which will support tourists to The Red Sea Project and AMAALA.
Saudi Arabian airlines enjoy similar geo-location benefit as Turkish Airlines, where its key hub of Istanbul enables access to more than half of the world’s population with a narrow-body aircraft. Also, the country’s airports can play transit hubs similar to Dubai, Doha and Istanbul, with the country’s airlines competing with “super-connectors” such as Emirates and Qatar Airways.
The Kingdom has significantly improved visa availability beyond business and religious visits with e-visas for 57 countries. Pre-pandemic, Saudi Arabia recorded about 20 million international inbound tourists (the number of religious visits is only about 10 percent of this) and plans to take this to 100 million by 2030.
Current international tourist arrival levels for the country are still significantly below that of Turkiye, for example, which recorded over 50 million in 2019. However, given the relatively recent easing of visas and the post-pandemic recovery, tourism activity should see a rapid increase in the near to mid-term.
- The writer is Raman Singla, Director of Fitch Ratings.
