Three years on, Saudi’s new airlines still grounded

No-one is really surprised that the two new carriers have once again missed their proposed launch dates for the year

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It was back in December 2012 that GACA, the civil aviation authority of Saudi Arabia, awarded two new domestic licenses in an effort to shake up the kingdom’s under-performing airline market.

Qatar Airways and Bahrain’s Gulf Air were named as the winning bidders, although the latter quickly distanced itself from the process. Qatar Airways created a new brand for its Saudi offshoot, Al-Maha Airways, while the Gulf Air licence evolved into SaudiGulf Airlines under the auspices of Al Qahtani Group.

GACA’s promise that flights would get under way in 2013, however, proved hollow. Al-Maha and SaudiGulf subsequently committed to launching services in 2014. That also did not happen.

With 2015 now drawing to a close, no-one is really surprised that the two carriers have once again missed their proposed launch dates for the year.

The glacial pace of progress must be infuriating for SaudiGulf president Samer Majali, an illustrious airline executive who earned his stripes heading up Gulf Air and Royal Jordanian Airlines. But if his patience is wearing thin after three years of bureaucracy, he masks it brilliantly.

“The reason it’s taken so long is because … SaudiGulf took the decision to introduce brand new aeroplanes in a very, very high specification,” Majali tells Al Arabiya News, refusing to criticise GACA for what most observers consider to be deliberate stonewalling by the regulator.

He insists that ordering brand new aircraft – as opposed to deploying second-hand planes – delayed the airline’s launch by about 18 months, citing the kingdom’s comprehensive auditing processes. That does not explain why successive launch dates were announced and later scrapped, of course, but it concords with GACA’s own assessment that “technical reasons” are behind the latest delays.

New year, new resolve

So what now? Will SaudiGulf finally get off the ground in 2016, bringing much-needed competition to a market that has stagnated under the dominance of flag-carrier Saudia? Yes, Majali says. Probably.

“We expect that we will get the [operating] licence … early in the new year, and then we’ll do some soft operations in the first quarter,” he confirms, before qualifying the projection. “Then, hopefully, the idea is to start our full schedule before the second quarter.

“This is the plan, but it’s a plan because obviously it’s subject to the authorities doing whatever is necessary for them to do.”

Stopping short of announcing a firm launch date is probably wise given the recent run of false-starts. But SaudiGulf can at least point to clear signs of progress. The airline took delivery of its first Airbus A320 in November, allowing it to begin route-proving flights and emergency evacuation exercises in what Majali describes as the “final stage” of the licencing process. “We don’t know how long that will take,” he admits. “Things might come up.”

Assuming that SaudiGulf does get off the ground in 2016, the airline will initially deploy four A320s from its eastern base of Dammam for services to Jeddah and Riyadh. One international route will also be launched in the early stages, with Majali identifying Dubai as the most likely candidate. Further domestic routes will be added when 16 Bombardier CS300s begin arriving in 2017.

Free-market pricing

Asked about the domestic fare cap that GACA enforces to keep ticket prices low – but which incumbent carriers Saudia and Flynas have blamed for their financial losses – Majali says it would be “logical” to begin dismantling the regulatory mechanism as the kingdom transitions to open-market competition.

“There are multiple airlines now on the Saudi Arabian playing field, so the fare cap no longer makes sense,” he argues, while acknowledging that any changes must be gradual.

GACA took tentative steps towards reforming the fare cap in 2014, when it allowed domestic carriers to lift ticket prices within ten days of departure. By charging passengers extra for last-minute bookings, airlines can influence customer behaviour and improve the robustness of revenue-management projections. This dynamic approach to pricing is considered the norm in other aviation markets.

Before nit-picking about the regulatory landscape, however, both SaudiGulf and Al-Maha must first secure clearance to launch operations. It would be in everyone’s best interests if GACA ensures that 2016 is the year that both carriers finally take to the skies.

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