Saudi Arabia: Climate For Change

A busy public square in downtown Riyadh

Yousef Attiah, Vice-president, customer service, SAA

SAA is the biggest airline in the Middle East in both number of aircraft and passengers, and domestically it flies to 26 different destinations.

—Yousef Attiah, vice-president, customer service, SAA

Passenger growth and liberalization of the industry leads to bigger fleets, greater competition and expansion of airports

In a country as vast as Saudi Arabia, good transportation is key to the development of tourism. The primary instrument to service this industry is the kingdom’s national carrier, Saudi Arabia Airlines (SAA), which last year celebrated its 60th anniversary.

For the past nine years, since the kingdom first opened its doors to tourists, SAA has been the country’s only licensed operator of tours, and it plays a fundamental role in the development of the sector.

SAA is the biggest airline in the Middle East in both number of aircraft and passengers, and domestically it flies to 26 different destinations, says Yousef Attiah, the company’s vice-president of customer service.

Last year SAA carried 16.7 million passengers and that figure is expected to rise to 18 million by 2007. That means that we’ve been increasing our passengers numbers by almost a million a year since 2002, says Attiah. The good news for travelers is that SAA offers the latest technology, the most advanced services, good food and reasonable fares.

We are one of the cheapest domestic airlines in the world, especially when you consider the standard of services that we offer, says Attiah, who is proud to represent the Saudi culture through the airline, defined by hospitality, honesty and safety. We want to become a world-class airline with a Saudi feel, he adds.

Taking advantage of the growth of tourism, SAA made a $410 million profit in 2005, a 14 percent increase on the previous year. Nevertheless, the company is still committed to privatization to create a more competitive environment and attract foreign investment.

In two years’ time, SAA must achieve the main function of privatization, which is the splitting of the non-core businesses, comprising six different units, explains Attiah.

Catering will be the first unit to be privatized, followed by cargo, maintenance operations, technical services and ground handling, as well as private training through the Prince Sultan Academy. We hope to be ready for public offering as a holding company in three years, says Attiah, who is confident that a strategic partner will soon be announced. Through privatization, SAA is also looking to move into a more international sphere.

Part of the company’s privatization plan is the acquisition of 15 new Embraer 170 aircraft from the Brazilian aircraft manufacturer, seven of which have been delivered. The operation will cost $400 million and is self-financed by SAA. We are the first airline in the Middle East to purchase this type of aircraft, says Attiah, who stresses that Saudi pilots and technicians will undertake extensive training in order to operate the new fleet.

Founded in 1969, Embraer (Empresa Brasileira de Aeronautica S.A.) is one of the largest aircraft manufacturers in the world, focusing on light aircraft for regional aviation. These aircrafts have performed impressively so far. They are economical and the customers are very happy with the services offered, says Attiah.

SAA remains the largest airline in the kingdom, but Crown Prince Sultan, Deputy Prime Minister and Minister of Defense and Aviation, has recently created the General Authority of Civil Aviation, to oversee the liberalization of the airline industry, as well as issuing new licensing.

The Jeddah-based charter operator National Air Service (NAS), became the first private airline to operate in the domestic market with exclusive business-class flights between Jeddah and Riyadh. This is a positive change for Saudi Arabia, as the growth in the Saudi market is truly beyond the capabilities of SAA alone, admits Attiah, hoping to create synergies between his company and future competitors.

The UK low-cost carrier easyJet has also been offered the opportunity to franchise its name in Saudi Arabia through NAS, although a deal is not expected before the end of the year. There are great opportunities in this segment of the industry, as only a few budget airlines at present operate in the Middle East. A similar deal has been offered to low-cost airline specialist Mango Aviation Partners.

As Middle East destinations have grown more professional at self-promotion, the numbers of regional travelers have escalated. Cities such as Cairo, Dubai, Damascus, Mecca and Medina are increasingly popular in the Arab world. Saudis, in particular, are among the Gulf’s most frequent flyers and billboards advertising quick flights in the region are to be found all over the kingdom.

But Saudi Arabia is also well connected to the wider world. New routes have been opened to the east, to Osaka and Hong Kong, and American visitors can easily reach the kingdom by SAA which runs regular flights from New York and Washington D.C. SAA also offers the golden service route to Europe and North America, and regionally to Dubai and Beirut. We have dedicated counters in both ticketing offices and airports for this particular service, says Attiah. Golden service includes quick reservation, fast immigration procedures, a special meal and entertainment on board and, upon arrival, a special greeting by the ground staff. Should any problem arise, clients receive extra attention in resolving it.

E-ticketing is also a priority of SAA which is striving to become a paperless organization by mid-2007, as mandated by the International Air Transport Association (IATA). This will be a cultural change for the organization and the country as a whole, says Mr. attiah.

To handle the increasing number of passengers, the General Authority of Civil Aviation is overseeing the expansion of several of the country’s airports. Works are currently being carried out at King Abdul Aziz International Airport in Jeddah, as well as at the airports in Ha’il, Medina and Bisha. Jeddah’s airport in particular is used as the arrival point of millions of tourists worldwide on their way to Islam’s two holy cities of Mecca and Medina. The airport will need to serve about 21 million passengers a year over the next 20 years to meet growing demand.

Looking at the company’s long-term goals, Mr. attiah says: We have concentrated on the domestic market during 2005 and 2006. This year we will begin shifting from domestic to regional, and in 2007 and 2008 we will move on to the international market.