The Saudi Arabian domestic flight market offers ‘deep opportunities’ and flyadeal will continue to ‘go where the money is’, according to its chief customer and commercial officer.
Speaking on the sidelines of Aviation Show MEASA in Dubai last week, flyadeal’s Sudeep Ghai partly attributed the low cost carrier’s early success to the difficulties faced by the Saudi Arabian economy.
“We are focusing on our bread and butter, and we are finding that we had deeper traction in Saudi Arabia than we expected,” he said.
“The market is ready for low fares, the economy has been in slightly difficult shape in the last 12 to 18 months, prices have been rising, government subsidies have been reducing a bit - the focus is on people needing to spend less.”
The initial public offering (IPO) of flyadeal was first discussed within days of the airline’s launch in September 2017, and could happen at the same time as that of national carrier Saudia, which is owned by the same parent company, Saudi Arabian Airlines Corporation.
Whether or not the IPO goes ahead will depend on the results of both companies, said Ghai, who predicted that flyadeal’s own results would be ‘robust’.
He said that the Public Investment Fund, the sovereign wealth fund which backs the Saudi Arabian Airlines Corporation, “is looking to put a lot of what have historically been state entities on a strong commercial footing”.
In addition to carrying two million passengers in its first year, flyadeal has surpassed its rival flynas to become the number two carrier on the Jeddah-Riyadh route – the ‘thickest’, or busiest, route in the Europe, Middle East and Africa (EMEA) region.
There are currently between 45 and 50 daily flights on the route, with flyadeal being the second-busiest operator behind Saudia.
flyadeal currently has eight aircraft, flying eight routes within the kingdom, but plans to have 50 aircraft within five years, said Ghai.
With an order for new aircraft expected to be placed this month, it has the option to select planes capable of long-haul flights.
However, Ghai said there were still opportunities to pursue in the domestic market.
Speaking at a panel session at the Aviation Show, he said: “We have been entirely domestic, yet our plans originally were to open up to international. What we found was the traction the model has had, with the discipline focused on cost, has had better take-up than we expected in Saudi Arabia.
“We are finding there are deep opportunities we can pursue within Saudi without having to look further afield, which is great as it has kept our model relatively clean.”
Public Service Obligation (PSO) flights – routes that may not be profitable but for which airlines receive a subsidy because they have a public or economic interest - were not ruled out by Ghai.
“We don’t mind if the government comes forward and offers us a subsidy to fly into certain markets, but it hasn’t done yet,” he said.
Ghai also said flyadeal had focused on providing a ‘pure low cost’ offer, with its slogan ‘every day low fares’ promoting a single-class product, without providing frills such as flat-beds or codeshare agreements, as has been the case with UAE-based carriers flydubai and Air Arabia.
“From our point of view, we have looked at it very simply,” he said. “We don’t think there is a genuine low-cost airline within the region. There is an opportunity and that’s what we have set about addressing. Low cost on a global basis has been a very malleable term.”
The company does 95 percent of its sales online, and apart from billboards in Jeddah and Riyadh and a small amount of newspaper advertising, had launched its product digitally, he added.
“80 percent of the Saudi population is under 40, they average two phones per person, they will spend two and a half hours per day on social media,” he said.
“It is one of the highest, richest markets worldwide when it comes to penetration of things like Facebook and Twitter,” he said, citing a study by Hootsuite, which showed that the kingdom experienced the fastest growth in social media use in 2017, with year-on-year growth of 79 percent, followed by the UAE at 46 percent.
“[Saudi] is one of the fastest-growing markets worldwide for social media,” he said. “People don’t realise this, they think of Saudi Arabia as a conservative market with religion at its core, which it is, but it’s deeply progressive in terms of interaction, partially because it’s socially conservative. People talk and interact on social media.”
Extensive smartphone penetration in the kingdom had allowed flyadeal to talk to, track and promote to customers online, he said, as well as educate the market about using a low-cost carrier - including factors such as only paying for luggage allowances or in-flight meals when required.
Travel and tourism in Saudi Arabia offers huge potential, he said, thanks to the opening up of the country in general with Saudi tourist visas coming online, and ambitious expectations under the kingdom’s Vision 2030 to increase capacity for religious or Umrah visits from eight million to 30 million annually by 2030.
Looking to flyadeal’s future, Ghai said that while the airline’s customers are currently are a blend of commuters and business travellers, families, religious traffic and workers, with 70 percent of those travelling Saudi nationals, that is set to change.
“As we expand, religious traffic will become a bigger component and we will see more worker traffic,” he said, adding: “As we transform as a business over the next five or 10 years, we will go from being a Saudi outbound business to being more of a blend of Saudi outbound and inbound into Saudi. Change is going to come.”
(Reporting by Imogen Lillywhite; Editing by Michael Fahy)
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