Saudi Arabia Thinks Its New Airline Can Dethrone the Middle East’s Legacy Carriers

Saudia Arabia’s government made news earlier this month when it hinted at plans to build a global airline, based in the kingdom, to take on regional powerhouses Emirates, Qatar Airways, and Etihad. But will Saudi Arabia be able to dethrone Dubai and Doha as the world’s airline crossroads? The plan could be harder to execute than the country’s rulers might think, no matter how much money they throw at the problem, and it is likely fueled by regional tensions more than any economic imperative.

Details are scant, but Airline Weekly understands that Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, intends for the new airline to be part of the $130 billion in investment he’s spearheading to transform the kingdom into a global transportation and logistics hub. The investment is part of his multi-trillion dollar blueprint to wean Saudi Arabia off of oil and diversify its economy.

But this could be harder than Prince Mohammed thinks. Saudi Arabia historically struggled to win over both domestic and international tourists due to societal limitations, including a strict no-drinking policy and restrictions for women. Riyadh hadn’t welcomed international tourists for so long that its infrastructure remained underdeveloped. Even locals complained of a lack of venues.

Until last year, authorities forbid local restaurants and malls from playing music. Although officials eased some of these restrictions, much of that doesn’t apply to residents. Because the local culture doesn’t allow for much intermingling between the sexes, most Saudis enjoy the freedoms of being in unknown territories in cities such as Dubai, Cairo, London, or Paris. Moreover, Saudi Arabia continues to face global opprobrium for its alleged role in the 2018 murder of dissident journalist Jamal Khashoggi in Turkey.

There’s more to the new airline than just tourism, analysts say. Saudi Arabia just recently papered over its tensions with Qatar by ending a years long regional blockade, which required Qatar Airways to fly circuitous routes to avoid the airspace of the blockading countries. But fissures still remain, as Qatar did not accede to all of Saudia Arabia’s demands, among which was reining in its often critical news outlet, Al Jazeera.

But tensions more recently have flared with one of Saudi Arabia’s allies in the blockade, the United Arab Emirataes (UAE), home to both Dubai and Abu Dhabi and long a Saudi stalwart. OPEC+, which includes 10 countries led by Russia that are not formal members of the oil cartel, aimed to limit production to keep oil prices high as the world emerges from the worst of the Covid-19 pandemic. The UAE bucked the cartel by saying it wants to raise production and has further accused Saudi Arabia of bowing to Russia’s demands, Airline Weekly has learned.

It’s no secret that Prince Mohammed has long coveted the global business success and prestige Dubai has and aims to replicate it in Saudi Arabia. The country has broken ground on a new tech-focused city in the desert, Neom, with an aim of attracting massive foreign investment and to further diversify the economy. Now, the tensions with the UAE are fueling the drive for a new Saudi airline, one that would knock both the troublesome Qatar and Dubai off their perches.

It is understood that the new airline — yet unnamed and reported first in English by Reuters — would be a premium global superconnector, like Emirates, Qatar, and Etihad. The number of air routes from the kingdom would go up from about 100 now to 250. A difference from previous ambitions for Saudi Arabia’s airlines is that the new carrier would supplant Saudia, which would focus on religious traffic bringing pilgrims to the country’s holy sites, especially during the Hajj pilgrimage. Budget carriers Flynas and Flyadeal would then concentrate on low-cost domestic and regional travel and near-international routes. It remains unclear if any of the three existing airlines would feed traffic to the new airline.

First, the new airline’s potential strengths. Prince Mohammed’s plan to transform the economy includes making Saudi Arabia, which has struggled to attract foreign visitors, a tourist destination. The country has reformed its visa regime to allow more visitors and, in 2019, began issuing tourist visas for the first time, instead of just business and religious pilgrimage visas. The Covid-19 pandemic has put those efforts on ice, however. A new global airline would play into that new market and funnel tourists to the kingdom. The country itself is large for the region, with a population of about 35 million people, which provides it with significant pool of passengers, especially when compared with neighboring countries, like the UAE, with a population of about 10 million, and Qatar, with just 3 million.

So build it and they will fly? Not so fast. Although Saudi Arabia is pouring billions into the airports in Riyadh and Jeddah, it will take more than just airports to create a hub. Emirates, Qatar, and to a lesser degree Etihad, have spent decades building their brands, networks, and products, Craig Jenks, founder of consultancy Airline/Aircraft Projects, points out. Those three airlines have a corner on flows to Africa and much of Asia. Nearby, Turkish Airlines has built a vast network that, in addition to Asia, Africa, and Europe, handles East-West passenger flows to many former Soviet republics. Not far away, Ethiopian is building a lucrative franchise in Africa-China traffic flows.

And just throwing money at an airline is not the answer: Etihad tried to buy its way into the big league and has since had to retreat. At an industry conference a few years ago, Qatar Airways CEO Akbar al-Baker famously told the CEO of Oman Air that it was “too late” for the sultanate to build a superconnecting airline. Fabulously wealthy Saudi Arabia is no Oman. But al-Baker’s point remains salient: The field is crowded, and any new entrant would be decades behind the competition.

Although it is not yet free-wheeling Dubai, the prince has relaxed some of Saudi Arabia’s more stringent social rules and brought the morals police to heel. But has it been enough to attract inbound travel or a talent pool needed to run a global airline? This remains an open question. The three big Gulf carriers rely on foreign employees at almost every level, from flight attendants to the C-suite. But living in cosmopolitan Doha or Dubai (or close to, in Etihad’s case) has always been an easy sell for foreign talent. Would conservative Riyadh attract the same talent?

If it is built, will passengers fly it? Saudi Arabia, for all its recent liberalization, remains deeply conservative. Will premium globe-trotting passengers fly an airline that doesn’t serve wine with meals or that may require a dress code? Saudia, after all, does not serve alcohol and does enforce a dress code. By contrast, alcohol is readily available on other airlines in the region, and female passengers are not required to cover their arms, nor male passengers barred for wearing shorts. Lingering horror over the Khashoggi murder won’t help in attracting flyers.

If price is right, the network is convenient and far-reaching, and the passenger experience is top-notch, people will fly it … eventually. And therein lies the rub. Emirates, Qatar, Etihad, Turkish and Ethiopian, to name a few regional examples, not to mention Singapore Airlines, Lufthansa, Air France and a host of other intercontinental airlines will not sit still while the new Saudi airline ramps up. In other words, creating a premium superconnector airline from whole cloth may be a more intractable problem than Saudi Arabia’s billions can solve.