Middle East Aviation: Saudi Arabia’s Vision 2030

Welcome to the second article of a 3-part series exploring the Middle East Aviation Market. Further insights can be found in our recent report Middle East Aviation: Transformation, Growth and Future Challenges.

This article delves into the disruptive market forces shaping the Middle East region, exploring the strategies outlined in Vision 2030 for accelerated growth and examine the key factors required to achieve the ambitious targets.

Vision 2030 has taken years in the planning and represents one of the most fascinating and expensive economic transformation projects in the world. The plan to turn an oil-dependent economy into a major service and tourism-based economy is visionary, exciting and hugely expensive, capturing the attention of airline and airport CEOs throughout the region. Investing over 12.4 trillion Saudi Riyals (approx. US$3.3 trillion) the total project has three targets: to create an ambitious, vibrant, thriving society that through a series of transformational programs places Saudi Arabia as the key commercial and cultural center in the Middle East. It aims to eclipse anything yet seen in the United Arab Emirates, or more recently Qatar. In Saudi Arabia, such ambition cannot be achieved without a dramatic change in the aviation market. Plans are already well developed to achieve those objectives with alignment to the larger infrastructure investment in major cities, in which projects at airports are just one element.

By 2030 the Vision 2030 plan calls for tourism to account for over 10% of GDP; generating at least one million additional jobs as GIGA projects (such as NEOM, Amala and the Red Sea Project) attract tourists from around the world seeking a combination of cultural and beach holidays. An additional 150,000 hotel rooms will become available in the next few years, including seven-star luxury accommodation investments in locations such as Al Ula and the Red Sea Resorts. Hopes are for over half a million hotel rooms to be available per night by 2030.

Facilitating such growth is challenging; significant infrastructure investment, skills training, easing of visa requirements, and some very expensive branding and destination awareness campaigns targeted at high-worth travelers worldwide are only part of it. But perhaps the largest part of the story is around the ambition for increased visitors to the Kingdom, and with that ambition both the direct impact on the local aviation market and the subsequent “ripple” effect in other markets across the Middle East.

Vision 2030 Aims for 300 Million Air Passengers by 2030

Vision 2030 has a target to reach 300 million air passengers by 2030, 100 million of whom will be tourists (however that classification is determined). This is an extremely ambitious target considering that the current estimated passengers (to/from Saudi Arabia) in 2023 is 107 million, as the table below shows.

Having access to a domestic market of nearly 43 million passengers annually provides a solid platform for the total market. However, achieving that target will require levels of international capacity growth never seen in any market. To achieve the required volumes, demand will need to increase by over 20% per annum through to 2030, a level of growth three times higher than the average since 2010 through 2019 and the pre-pandemic levels. Such a sustained rate of growth has never been achieved in any major country market. And whilst the target is visionary, achieving such a number is becoming increasingly challenging as the aviation sector faces a series of supply challenges. 

Naturally, there is huge confidence within the local market that Saudi Arabia will reach its targets under Vision 2030 and indeed, realizing even half of their aspirations would be a remarkable achievement. So, what are the key factors that will determine how close Saudi Arabia will get to a 300 million air passenger market by 2030?

New Airlines, Aircraft Orders and Resources (Eventually)

One of the fastest accelerators of growth is to launch a new airline alongside the existing locally based carriers. This leads to the launch of Riyadh Air and perhaps one or two other carriers that will finally be announced in the next few months.

Riyadh Air has a hugely ambitious plan to connect the capital city to over 100 international destinations, potentially creating around 200,000 jobs. They have also placed an order for 39 B787s with the first deliveries initially expected in 2025, although Boeing’s ongoing production issues may result in the initial timescales being delayed. Additionally, in November 2023, the airline’s CEO, Tony Douglas, was quoted as saying they were weeks away from announcing their narrow-bodied fleet order. However, weeks have now turned into months and the ongoing issues at Boeing (and to a lesser degree Airbus) appear to have disrupted this plan. Either with or without the narrow-bodied aircraft order, Riyadh Air are unlikely to be a significant capacity provider before the end of 2026 at the earliest, given the necessary ramp-up that any new airline encounters. As each month passes, their contribution towards that 300 million passenger target becomes ever more doubtful.

The launch of Riyadh Air allows Saudia to focus on Jeddah and the religious markets to the city, along with commercial demand. It also probably means that Saudia will have to give up some routes to Riyadh, and perhaps even slots at constrained airports such as London Heathrow. The revised focus also places more emphasis on Saudia to operate profitably with a much clearer focus and business strategy, including the utilization of the 39 B787s ordered in 2023. With an almost “guaranteed” religious market to cater to, strong domestic demand, and an established regional market, it should almost be impossible for Saudia to fail. However, only time will tell if they deliver on that clearer market position.

Alongside Saudia and Riyadh Air, other new airlines are under development in Saudi Arabia. Planning to launch later in 2024 are NEOM Air, who are promising levels of service in line with visions for the wider development of the area. NEOM Air currently has no IATA designation and even more importantly no aircraft ordered, or announcements of any network plan, all of which makes a 2024 start look doubtful. Of course, aircraft can be leased at short notice, but the ongoing delivery issues have resulted in airlines extending current leases. Plus, given the high-quality service that NEOM aim to deliver, retrofitting cabin interiors make that option seem unrealistic as well. Still wider supply chain issues have resulted in many of the original NEOM projects falling behind schedule, so perhaps a delay in the new airline is the least of the problems being faced.

Aircraft aside - and that is a major issue - a larger point is perhaps the availability of qualified staff to run the operational side of these enlarged airline operations. Whilst Riyadh Air aims to be digitally native, and NEOM Air hopes to operate “innovative aircraft”, attracting a pool of qualified pilots with experience may be challenging.

Before the pandemic, forecasts predicted a global pilot shortage reaching nearly 35,000 by the end of the decade. Post-pandemic, that shortage has become more severe. Despite efforts to refuel the labor pipeline, it is taking longer than anyone could have hoped. All of which means airlines in Saudi Arabia are probably going to have to pay above market rates for experienced flight crews. Despite the attractive tax-free benefits in Saudi Arabia, similar perks exist in other parts of the world. This all makes the “come and work for us” pitch challenging, leading to recruitment fairs around the world this year!

In the next article in this series we ask: where will the 300 million passengers come from, and how sustainable will that demand be over time?

Stay tuned for part 3 of our Middle East Aviation Market series by signing up for instant blog updates below. ⬇️

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