Exclusive: In Jeddah, Saudia prepares to change the game

By Shayan Shakeel 13 November 2017
Exclusive: In Jeddah, Saudia prepares to change the game

The Middle East might be the crown jewel of the aviation world right now, but the region’s success so far has been a story of players punching above their weight: the smallest countries in the Middle East have the largest airlines and consequently the biggest airports. By contrast, in Saudi Arabia, a country whose population is roughly two-thirds greater than all of the rest of the six-nation GCC combined, the national carrier currently operates out of an airport which can only manage eight flights per hour.

Which is why Saudi Arabian Airlines CEO Jaan Albrecht can’t wait for King Abdul Aziz Airport in Jeddah (JED) to complete expansion on its new terminal.

“Just imagine an airline constrained to 8 flights per hour being able to operate over 35. This is a dream come true for us,” Albrecht tells Aviation Business.

The new terminal has been in a constant state of development for nearly 12 years. But once the first phase of its expansion is complete in 2018, JED it will have new fuel network systems, aprons, baggage handling systems, 46 gates; the ultimate goal is to increase its capacity to 80 million passengers per year. Being built at a cost of US$7.2 billion, the airport bears the prospect of redefining the country’s aviation and tourism fortunes, according to the CEO.

“Jeddah is and always will be the home of Saudia. Once the new terminal comes around we will be able to reschedule the way we fly for more connectivity, not just to other muslim countries with high demand for religious tourism, but to European countries with large muslim populations as well,” he says.

Religious tourism as well as those looking for travel “with a Saudi flavour” is one of the main draws Saudi Arabian airlines, and indeed the country, is prepping itself for in the years to come, according to Albrecht.

“We’re being supported by the government in the facilitating of visas for travellers, as well as the construction of new high speed rails that will shuttle travellers to the holy cities directly from Jeddah. It’s all coming together well, and we’ll be able to move swiftly once the new terminal opens.”

Saudi Arabia has been pushing to liberalise its economy and attract more tourists as well as business in an effort to spur economic growth. Its search for alternative sources for revenue is behind the plans to privatise state-owned entities such as Saudi Aramco as well as Saudi Arabian Airlines, according to a report.

Albrecht declined to comment on how those plans will proceed but pointed out that the airline’s owners have been making large investments to make the airline fly higher than it has been. So far, the airline has accepted 60 Airbus and Boeing aircraft in two years; in 2018 it expects to receive 15 more.

“We’re in the middle of a deep transformation that began a little over two years ago. There is an overall rethink and redesign of the airline around our core strengths: Saudi Arabia has a 32 milllion large domestic market, 27 airports and two holy sites that attract millions each year,” he says. “Other countries in the region don’t have the ability to tap into that.”

The need for a rethink has become even more pertinent now that Saudia doesn’t enjoy a monopoly in its home market. Apart from the ubiquitous Gulf carriers plying the skies over Saudi Arabia, low-cost operator Flynas too has been growing its share in the market. The latter is among the reasons Saudia launched its own low-cost subsidiary in September.

“Competition is nothing new,” says Albrecht, “but we need to keep passengers within the group. With Flyadeal, we will coordinate our schedules to give customers a choice within the group both domestically and on long-haul.”

Of course, key to getting more tourists and travellers into the country will be affecting the image issues that have persisted with travel in the Kingdom. In 2016, Jeddah airport was ranked among the worst to land at, according to a report. A spokesperson for the Saudi Ministry of Interior told Aviation Business last year that the authority was working to address inefficient processes and minimise the time travellers spent trying to get through the airport.

Meanwhile, Saudia itself found itself in the news for asking female travellers to cover up when travelling with the airline. However, Albrecht doesn’t feel the news is warranted. “We have no idea where that news came from,” he says Albrecht. “We’ve made no new decisions or announcements regarding any kind of dress code.”

It might well be that Saudia was subjected to press attention harder than it deserved. Given its target market as well as its recent investments in the passenger experience, Albrecht says Saudia now has just what it needs to entice travellers.

“You have to recognise who your customer is. We offer the best product with a distinct Saudi flavour. Saudi Arabia is Saudi Arabia and will continue being Saudi Arabia, it is the key distinction from other countries. It isn’t a challenge but a huge opportunity for us. We’re investing in inflight entertainment, lounges at the airport, improved catering; and we’re getting good reviews as well, which mean that our other efforts to cut costs aren’t happening at the expense of our passenger experience, or at least in a way in which our service standards haven’t grown lower,” says Albrecht.

However, it’s important to remember that Saudia doesn’t want to be a hub airline, says Albrecht. “We already have a large domestic market that we want to fly within the country. Our load factors are consistently in the 70s. So we don’t need to become a hub airline to fill seats, just fill the rest of the plane with connecting traffic. And that we will be able to do once the new airport comes online by giving customers greater connectivity on a direct route to the Kingdom instead of having to pass through any of the hubs in our vicinity.”

By being able to divert focus to long-haul operations, Saudia will be able to boost load factors into the 80s, says Albrecht. “And we’ve taken a huge investment in our onboard products in the premium cabins as well as lounges, environment and the whole concept to attract customers.”

This will also help the airline control costs and better manage profits, which in the last quarter of 2016 fell 45 percent from the previous year. “It’s a very competitive market where yields are trending downwards and we aren’t excluded even domestically in the Kingdom,” concedes Albrecht.

Albrecht, a former pilot has previously served as the CEO of Austrian Airlines and Sunexpress, both part of the Lufthansa Group, as well as CEO of Star Alliance. His relationships with airlines in the latter will help Saudia embark on partnerships to grow its network. “We will embark on codeshares within Sky Team and see a lot of potential for additional codeshares,” he says.

With the new airport, Saudia will try to bring  traffic “back to where it belongs,” says Albrecht. “Does that mean everyone is going to fly through Jeddah? No,” he says. “But it will be a new and attractive proposition to connect traffic to the world from the Kingdom via Jeddah. It is something we are serious about.”

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