RIYADH: Saudi Arabia’s Riyadh Air has secured a $1.3 billion credit facility from a consortium of Gulf banks to fund its upcoming launch in 2025, according to the airline’s chief financial officer.
Speaking to Arab News at the Future Investment Initiative in Riyadh, taking place from Oct. 29 to 31, Adam Boukadida described this as the airline’s first corporate finance deal.
This initiative aligns with Riyadh Air’s goal, backed by the Kingdom’s Public Investment Fund, to serve over 100 destinations by the end of the decade through strategic partnerships.
“This is the first corporate finance deal for Riyadh Air. We’re very excited about that. It’s for up to SR5 billion. It’s what is called an accordion structure,” Boukadida said.
He noted that the transaction involves six Saudi banks, including Gulf International Bank, and two financial institutions from outside the Kingdom, one of which is Emirates NBD from Dubai. “We’ve got a complement of local and regional powerhouses to support us in our first transaction,” he added.
The CFO explained that the transaction is for 12 months, with an option to roll over and extend, which the company anticipates will occur. The funds will serve as the backbone of the airline’s balance sheet and will be utilized for general corporate purposes as needed.
“It is in Saudi riyals and it’s very well priced. We have a great credit rating, of course. There’s a strong belief from our banking partners about the purpose of this and the importance of being part of the first syndicated revolving credit facility,” he said.
Since the company is currently non-operational, Boukadida mentioned that they may consider various financial instruments in the future, including debt, capital markets, and bonds. “It’s really good financial practice to start and support and build out your balance sheet with what would be called a club or syndicated loan there for working capital benefits and requirements,” he explained.
Boukadida also highlighted that the airline plans to have just 130 aircraft over the next five years. “In aviation, especially with the size and scale we’re looking to achieve at Riyadh Air, we explore many creative financial solutions in the future, whether that be leasing or mortgage-type aircraft financing transactions,” he said.
Regarding a recent agreement with Aramco, which was signed during the FII, Boukadida said, “It’s likely that Aramco will be our biggest fuel supply source.” He said the two companies want to jointly explore ways to make the aviation industry more sustainable.
On sustainable aviation fuel, he said affordability remains a significant challenge. “Generally speaking, sustainable aviation fuel, or SAF, is about three or four times more expensive than normal jet fuel. So that’s something that needs to be addressed for sure,” he remarked.
Shifting to digitization, Boukadida discussed the airline’s ambition to provide an Amazon-like experience. “We’re a digital company that enables travel rather than a traditional legacy airline,” he said. “We will offer, and we announced it yesterday, version 1.0 of what we call ‘offer and order.’ It’s very similar to an Amazon experience or, in the region, a noon.com experience where you do your basket online retail shopping,” he added.
