The News
Riyadh Air, the new national airline launched by Saudi Arabia’s sovereign wealth fund, has not seen any impact on its business plans from a government review of spending commitments, the carrier’s chief executive said in an interview with Semafor.
The launch of Riyadh Air is “beyond super important” because of the kingdom’s goal of attracting 150 million tourists a year by 2030 and plans to host global events like the World Expo that year and the men’s soccer World Cup in 2034, CEO Tony Douglas said.
The airline, which has announced it will start its maiden route with flights to London on Oct. 26, is funded through equity from the kingdom’s Public Investment Fund (PIF) but is already looking at options for financing the 182 aircraft it currently has on order including Islamic bonds, sustainable debt, and deals with aircraft lessors, he said.
In this article:
Matthew’s view
Riyadh Air’s operations are crucial for Saudi Arabia’s wider strategy to become a travel and logistics hub, as part of Crown Prince Mohammed bin Salman’s plan to diversify the economy away from oil.
Yet much has changed since it was launched in early 2023. At that point, the government’s finances had been buoyed by a surge in oil prices that lifted the budget into its only annual surplus of the last decade, prompting a wave of spending.
Since then, oil prices have languished. In response, PIF has cut budgets for some of its key projects and the finance ministry has said it is reprioritizing spending commitments. The government’s focus is expected to shift away from projects like NEOM to making sure it delivers on events like Expo 2030 and the World Cup.
Strategic priority or not, airlines are famously tricky to get right. Making Riyadh Air a profitable endeavour will be a challenge, not least because of competition from well-entrenched rivals next door that also benefit from deep-pocketed owners and already have vast infrastructure in place. Yet it will also be impossible to achieve the crown prince’s greater ambitions without a world class airline to support them. That should give Douglas plenty of runway to get Riyadh Air going, even if government support won’t last forever.
Know More
The airline is set to take delivery of a new Boeing 787 soon and will receive one plane a month for the next year, increasing to two planes a month at the end of 2026. It aims to have flights to 100 international destinations within five years in a bid to end what Douglas called a “totally unacceptable” lack of connectivity between Saudi Arabia and the rest of the world.
Initially, Riyadh Air will be offering tickets to its employees and those of the PIF as it looks to iron out any teething problems, with bookings opening to the public early next year. Ticket prices will initially be “less price sensitive because demand will be significantly greater than our ability to supply,” he said. He declined to comment on whether Riyadh Air would look to grab market share from regional competitors like Emirates and Qatar Airways by offering cheaper seats, but said the focus would be on “outstanding value.”
Notable
- Riyadh Air’s plush business class seats are designed to try to lure luxury travelers away from Gulf rivals, Bloomberg reported.
- Dubai-based Emirates reported a record profit this year boosted by passengers buying upgrades to more expensive seats, according to the Financial Times.