Saudi Arabian Airlines has developed into one of the world’s leading carriers, with a fleet of 91 aircraft transporting 16 million passengers a year to more than 70 domestic and international destinations

Flying high in the newly opened skies
A new epoch of privatisation, open competition and low-cost challengers heralds exciting times for the national flag carrier

Commercial air travel in Saudi Arabia has come a long way since American president Franklin D. Roosevelt helped establish the nation’s first airline when he gave King Abdul Aziz a twin-engined DC-3 Dakota back in 1945. In the 60 years that have followed, Saudi Arabian Airlines has developed into one of the world’s biggest carriers, its fleet of 91 aircraft speeding some 16 million passengers a year to more than 70 domestic and international destinations across the globe.

Now in the early 21st century, air travel in the Middle Eastern kingdom is entering into a new era which will involve the privatisation of Saudi Arabian Airlines, the ending of its 60-year monopoly on scheduled domestic flights and the establishment of a new range of low-cost services.

Saudi Arabian Airlines is in good health as it faces up to these new challenges with profitability more than doubling between 2003 and 2005 to reach a figure of some $133 million (£66.7 million). Passenger numbers, which increased by nearly half a million in 2006, are expected to rise by up to 15 per cent a year, with the number of Muslim pilgrims visiting the kingdom rising to 20 million over the course of the next decade.

“We have improved and simplified services for our customers, the economy is booming and traffic has increased,” says vice-president for customer services Yousef Attiah. “The airline serves so many different segments of customers: pilgrims travelling for the Hajj and Umrah religious festivals, businessmen and domestic travellers. So growth is good, but one of our major challenges is to find the best way to meet demand.”

KHALID ALMOLHEM Director General Saudi Arabian Airlines	YOUSEF ATTIAH VP of Customer Services of Saudi Arabian Airlines

An improvement in customer service is one of the key elements of the airline’s long-term development strategy as outlined by director general Khalid Almolhem, the man who oversaw the successful privatisation of Saudi Telecom in 2003.

Saudia, as the airline is often known, has started using state-of-the-art reservation and ticketing systems with the first e-ticket being issued by the director general earlier this year. Internet bookings, self-service boarding passes and a high-tech voice response system to check reservation status are also now being introduced.

Information on ticket prices, air routes and reservations is being provided through SMS text messages on mobile phones, while lounges for first class and executive travellers have been extended and modernised.

“We have introduced e-ticketing for domestic flights and we have improved on-board services in term of food and entertainment and sky sales,” explains Mr Attiah. “We have almost one million SMSs sent monthly to our customers to remind our passengers of ticket time limits, to confirm reservations, and provide information about departure times. The passengers are very happy with the new service.”

The improvement in customer service is a prelude to the airline’s privatisation programme which has begun with the sale of a 49 per cent stake in its catering unit for a figure of at least $373.3 million (£187 million).

	A ten-year plan for privatisation will begin this year with catering services and cargo, with other units to follow shortly afterwards

Launched in 1981, the catering business produced some 15 million meals in the first nine months of 2005 alone.

It generated a turnover of $171.5 million (£86 million) in 2005, a net profit of $38 million (£19 million) and a net operating margin of 25 per cent making it a highly attractive target for investment.

The catering division is the first of five units the airline plans to privatise before moving on to sell a stake in its core passenger transport service. Cargo, ground handling, maintenance and the flight academy will all follow before the core of the airline itself.
“The strategy so far is to approach strategic partners,” explains Mr Attiah. “Up to 49 per cent of the catering section should be in the hands of a strategic partner, then Saudia shares will go for public offering at a later stage.”

The airline is confident the formation of independent companies for each unit will boost growth, enforce a customer-oriented mentality and help meet rising competition as the kingdom liberalises air transport in the 21st century.

new routes
More European connections

In addition to the government’s efforts to highlight the nation’s tourism potential internationally and the ever-increasing numbers of pilgrims coming to the country, Saudis love to travel, spending around SR60 billion (£8.1 billion) annually on domestic and international travel and tourism.

Saudia director general Khalid Almolhem is enthusiastic about the prospects in the sector. And far from fearing the arrival of NAS and Sama on the scene, Saudia believe that the increased competition is vital if passenger demands are to be met.
The national carrier offers a regular schedule between Saudi Arabia and a number of major European cities.

Regarding the UK, the airline has a total of 12 flights to London Heathrow – five operating from Riyadh and seven from Jeddah.
Furthermore, effective from 22nd June, Saudi Arabian Airlines has launched twice weekly flights connecting the kingdom with Athens, Manchester, Munich and Vienna.

low-cost
Burgeoning budget carriers

Perhaps the clearest indication of the revolution in air travel in the Middle East is the emergence of low-cost carriers and Saudi Arabia is keen to embrace the new trend in order to meet increasing demand.

Saudi Arabian Airlines are studying the potential of developing a new low-cost arm to add to their well-established operations, while the kingdom’s civil aviation authority has given the green light for private airlines Sama and NAS to take advantage of the burgeoning budget carrier market.

Saudi Arabia is a promising market for low-cost airlines given that some 75 per cent of the country’s expatriate workers earn low salaries of around £267 per month and are likely to favour the new carriers to travel to their home countries.

Low-budget airlines are a relatively new phenomenon in Saudi Arabia. Their arrival is significant at a time when the industry is faced with economic challenges from rising costs and increased competition as more and more countries are adopting an open-sky policy.