Saudi Arabia is starting a new mega-airline meant to counter Emirates and Qatar. They already have Saudia, based in Jeddah, and they aren’t expanding it. Instead they’re starting from scratch with a $30 billion warchest to launch “RIA” based in Riyadh. They’re hiring away the CEO of Etihad, and they’re about to place a major order for new planes.
- They’re in “advanced talks” to purchase 40 Airbus A350s
- In total RIA is looking to acquire 75 planes. Boeing 787s aren’t out of the mix, but current tensions involving Russia and oil prices complicate matters. They’re also looking at narrowbody aircraft.
This new airline is meant to connect transit passengers from around the world to South Asia and Africa. That’s low yield business, and doesn’t do much for the Saudi economy, since passengers don’t even enter the country. Generally transit passengers help fill excess seats, supporting flights for local traffic. Here those passengers seem to be the goal, growing the country’s connecting traffic more than seven-fold.
Wanting to put the country ‘on the map’ and open up to the world, shift away from a reliance solely on oil and build into other industries, and looking at models like what Emirates has helped to do for Dubai makes a certain amount of sense.
However it’s a money sinkhole – just ask Etihad. But even lighting $30 billion on fire, they aren’t going to get themselves very much. Growing the airline remains faced with the challenges of even securing a Saudi visa for many (easier than it used to be, but an involved process and costly, and in most ways more cumbersome than the U.A.E.). Some specialized forms of travel, of course, may benefit:
At the end of the day Emirates already exists. Qatar can try to match, and lose money in the process. Saudi Arabia bankrolling another Gulf competitor means competing on service or price, and losing money either way, but without other changes inside the country it’s a path that doesn’t even have upside. If they succeed and shuttling traffic through Riyadh they’re only marginally better off at best.