Riyadh Air could challenge the large Gulf carriers on selected intercontinental routes if an aggressive pricing strategy is pursued, said Raffi Kasparian, managing director at Alton Aviation Consultancy.

Speaking to FINN about the booming Saudi aviation scene, Kasparian said the yet-to-launch airline was being pitched as a point-to-point rather than hub-and-spoke operator – but it could still steal share on some routes.

“The business model of new airlines in Saudi Arabia such as Riyadh Air is expected to be primarily reliant on point-to-point traffic to the Kingdom whereas airlines such as
Emirates and Qatar Airways rely on their hub-and-spoke models to cater for transfer traffic through their respective hubs,” he said.

“Competition has always existed in the Middle East and EK and QR will continue to compete on the transfer segment which account for 70% to 80% of their traffic base.

“Riyadh Air’s mandate is to serve the local travel needs of the Kingdom through a single hub in Riyadh while Saudia is expected to consolidate its operation in Jeddah.

“Whilst it is thought that Riyadh Air will cater to inbound tourism and corporate travel into the Kingdom and providing outbound services for Saudi residents, transfer
market could still represent an opportunity for the new airline to complement its local traffic base.

“In fact, connections through Riyadh could be established on select intercontinental flows (e.g., Indian sub-continent to the US, UK) with a potential to erode a portion of this traffic from other network carriers in the region, particularly if Riyadh Air elects to be aggressive on fares.”

The Saudi aviation industry is developing rapidly, with the help of huge state investments.

Commenting on the burgeoning sector, Kasparian said: “Whilst significant progress has been made on liberalising entrance into the country, particularly through introductions of tourist visas and the relaxation of airport slots constraints or traffic rights, further air service accessibility and developments in the hospitality sector will act as an incentive for visitation. Saudi’s continued commitment to tourism initiatives and giga-projects will also be required to establish attractions that will draw visitors from afar.

“Airlines in Saudi, including Riyadh Air must also overcome challenging access to new OEM aircraft slots. For example, should Riyadh Air continue with ordering the 787 as
the preferred aircraft type, it may have to wait aircraft delivery. Boeing currently face five-year production backlogs on the type due to skilled labor and parts shortages causing delays in production ramp-up. Options for Riyadh Air to acquire aircraft more quickly may include purchasing production slots from other airlines or rely on leasing.”
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