Saudi Air Mk 2
The Kingdom of Saudi Arabia (KSA) has two of many things. Two rulers, HM King Salman de jure and heir apparent Mohammed bin Salman de facto. Two holy mosques, at Mecca and Medina. Two airline hubs, Riyadh and Jeddah. And soon to be, two flag carrying airlines.
KSA also grows tasty potatoes that are slightly nutty in flavour and roast nicely. Your favourite airline revenue economist enjoyed eating these during his sojourn to Doha (see article), where they were surprisingly much cheaper than the far less tasty imports from America which everyone else seemed to buy.
Most countries only have one flag carrier, supposedly the airline owned or established by the local government and representing the nation officially around the globe.
British Airways is the UK’s flag carrier and Lufthansa is Germany’s. The United States has none by this definition – it used to be Pan Am – although the local regulator grants airlines flag carrier status when they receive permission to fly internationally. The United Arab Emirates has two flag carriers, Etihad in Abu Dhabi and Emirates and Dubai.
London-based Virgin Atlantic paints a racy redhead holding a Union Flag on their planes. They say she is carrying Britain’s flag but since they have no legacy of government ownership this is simply wily marketing by the canny carrier.
Saudia is the incumbent flag carrier of Saudi Arabia, competing with locally registered Flynas, Flyadeal and others, as well as others in the middle east (see article) and elsewhere.
So why does Saudi Arabia need two flag carriers? Read on…
Saudia’s shortcomings
Take a Saudia flight and you should have a good experience. There are comfy seats, pleasant staff and good food.
Skytrax, a consultancy, rates the airline as four star out of five. That makes Saudia comparable to Emirates, Etihad, British Airways, Lufthansa and Virgin Atlantic, who are also four star airlines. Local powerhouse Qatar Airways is rated five stars and sleepy Kuwait Airways has three.
Skytrax ratings can be controversial as it is not clear exactly how they are determined. But they are good enough to tell us that from a passenger experience perspective Saudia is just as good as anyone else once a passenger is en route.
But thanks to a confusing fleet strategy and complex two-hub model, Saudia has clear disadvantages compared with other local carriers.
The map below shows Saudia’s international routes, classified by flight number, for mid-summer 2023, not Ramadan, not Eid, not school holidays. After the middle east in maps article a reader asked why flight numbering is relevant.
For passengers their flight number matters not. Operationally speaking, as long as there are no duplicates things will be fine. But looking at how an airline numbers their flights gives an idea about how they manage things internally.
Inspecting the map shows Saudai’s two hubs clearly. There are also international flights from Medina to Cairo and Jakarta. At first glance, things look good – you can fly Saudia from two big cities, not just one. So what is the problem?
Take a look at the map below, which shows the routes by frequency.
Saudia does operate daily, double-daily or better routes. But because the flights are split between two hubs many long and important routes have less than daily services.
This really matters because consumers value choice over when they fly and the benefits of offering additional frequencies from one city are exponential, not linear. To see why, consider Saudia’s flights to the United States and London.
There are three flights a week from Riyadh to Washington DC – Mon, Thu and Sat, returning the same day. This means that a passenger looking for direct flights has nine options:
Out Mon, back Mon
Out Mon, back Thu
Out Mon, back Sat
Out Thu, back Mon
Out Thu, back Thu
Out Thu, back Sat
Out Sat, back Mon
Out Sat, back Thu
Out Sat, back Sat
A passenger going from Jeddah to London however can fly any day. They have 49 options (seven days out times seven days return), 5.4 times as many options for only 2.3 times as many flights (49 divided by nine and seven divided by three respectively).
Take both hubs together and things are much better. The map and table below show that 79.0% of weekly flights are on better than daily routes when both hubs are considered together. Take them separately though and only 53.4% of services are better than daily.
Remove Dubai, where Riyadh and Jeddah have 49 weekly services each and the numbers get even more stark.
To make things even more tricky, Saudia’s fleet is inconsistent, shown in the map below.
They have wide-bodies and single-aisles flying to European destinations. Their business class is quite different on each aircraft type. They do not yet offer premium economy but should (see this article and this article). However Saudi Arabia is a first class market (see article) and Saudia’s up-front product is solid.
Enter RIA
New entrant Riyadh International Airlines (RIA) is apparently after A320s 737s and 40 A350s. News reports indicate they are backed by Saudi Arabia’s sovereign wealth manager, the Public Investment Fund. Ambitious managers reckon they can beat big players Emirates and Qatar Airways in scale but in a fraction of the time.
Is all this true or realistic? Who knows. We will believe it when we are see it. But there are several good reasons to think that a model with two flag carriers could work in Saudi Arabia.
1. Saudia is not able to serve it’s two hub cities with the same schedule depth available to people living in Abu Dhabi, Doha or Dubai – if Saudia concentrated on Jeddah and RIA on Riyadh, Saudi travellers would have more and better air travel options.
2. Saudi Arabia is perhaps the world’s most significant long haul pilgrimage market, with nearly 2.5 million people performing Hajj in 2019 – Saudi Arabia’s rulers may perceive advantages to letting Saudia concentrate on pilgrimage traffic and RIA on business travel.
3. The Islamic calendar is movable and the Gregorian calendar is fixed – there may be revenue management advantages to letting Saudia specialise in traffic governed by the Islamic calendar and RIA the Gregorian. It is possible that business centre Riyadh is more susceptible to events in the Gregorian calendar than Jeddah as access point to the two holy mosques.
4. Crown prince Mohammed bin Salman is apparently a progressive thinker and, according to The Economist, likes to DJ in a cowboy hat on his yacht – in the event that Saudi Arabian airlines are at some point in the future allowed to serve alcohol the Kingdom’s rulers may perceive advantages in keeping Saudia as the “dry” option.
When your favourite airline revenue economist was at Qatar Airways, serving alcohol was a point of contention for a small but significant number of travellers.
5. Operating two separate airlines across two hubs may have operational or cost advantages compared to one airline across the same two hubs. As this is Airline Revenue Economics rather than Airline Cost Economics, please let us know if you have any thoughts as to what these might be.
oliver AT ransonpricing DOT com