Saudi Aviation Strategy: What’s New?

The world watches, fascinated, as the economic and cultural renaissance transforming work, life and play in Saudi Arabia, moves swiftly along, each dawn heralding some new excitement.

With travel and tourism a vital pillar of this transformation, straddling both economy and culture, the Kingdom’s dynamic and very ambitious Aviation Strategy is of considerable interest to everyone. From the tourists who can’t wait to visit to the businesses and investors queuing up to take part in the action on the ground.

What is the Aviation Strategy?

Saudi Arabia is poised to emerge as the Middle East’s preeminent aviation hub. Backed by US$100b in public and private funds, the Kingdom’s Aviation Strategy seeks to position Saudi Arabia as a global hub for transportation and cargo services. It will achieve this by delivering on its overarching objective which is to Increase the GDP contribution of logistics and transportation sector to 10% by adding US$20b to non-oil GDP.

Part of this effort is a continuous drive to improve safety, to enhance customer experience and to promote long-term environmental sustainability. (Source: Saudi Aviation Strategy, May 2022)

What are the main objectives of the Aviation Strategy?

A dynamic concept, Saudi Arabia’s aviation strategy is regularly updated to reflect evolving ground realities.

In its most recent iteration, the Kingdom’s General Authority of Civil Aviation (GACA) has updated the economic regulatory framework governing the aviation industry to ensure that it continues to ‘attract investment, boost competitiveness, increase transparency and enable the realization of the objectives of the Saudi Aviation Strategy’.

With every iteration, the strategy improves the regulatory, competitive and business environment for the aviation industry as it moves closer to its goal of making Saudi Arabia indispensable to the global aviation community by transforming the size, reach and quality of the services it provides:

     

      • Connectivity: its airlines will eventually serve 250 global destinations, up from the current 99 (2023)

      • Annual passenger traffic: By 2030, 330m passengers will travel through its 29 airports, up from 110m today.

      • Cargo Services: It will increase its air cargo capacity from 0.8m tonnes to 4.5m tonnes per annum and generate a 17% CAGR for air freight handling. Saudi Arabia currently accounts for 7% of the total Middle East air cargo transit market and handles a third of its own total demand for air cargo goods of around 2.5m tons. 

      • Performance: The strategy will help improve Saudi Arabia’s global ranking on the Logistics Performance Index from a respectable 49 to an impressive 10.

      • Employment: Create over a million employment opportunities including 200,000 direct jobs

      • Competition: By enhancing the role of regulatory authorities, these updates will create an equal opportunity environment, an even plain for all investors, current and potential to compete on.

    Aviation Strategy Update 2023: Highlights

    The effect of these regulations will be felt mainly by airports and airline operators.

    Regulations: The regulations aim to enhance operations at airports, facilitate privatisation of some airports and modernise wage structures to attract talent commensurate with the strategy’s grand ambitions. In addition, the new policy framework will introduce competition standards at airports, remove anti-competitive pricing measures and streamline the process for obtaining an economic license both for conducting air transport operations and for investing in them. 

    Not only will airport operators be encouraged to propose charges, albeit within the parameters described by GACA’s policy frameworks, to compete effectively with some of the world’s most advanced airports, they will be encouraged to diversify the services they offer beyond the purely navigational. Commercial facilities and services such as retail, food and beverages, parking, car rental, hotel, entertainment, and office spaces can help attract traffic and boost revenues. A new incentive scheme to evaluate and assess airport quality and performance is being designed to reflect the targets and standards that are being set as a result of the revised policies.

    To deliver on the strategy’s objective of significantly improving air connectivity across the Kingdom’s airports, the Kingdom needs to attract more air traffic. The regulations governing licensing for commercial and non-commercial carriers including private aviation are therefore being simplified. Charter flights will no longer have to apply for an economic license which will reduce costs; restrictions on ’empty-leg’ operations will be removed which will give international charter and business flights operators greater flexibility, improve network connectivity and boost revenues.

    The rules for distributing air traffic rights are also being revamped to allow national carriers to operate on international routes with limited capacity.

    Regulations governing ground handling and air cargo services have been updated to open up the sector and create a more competitive environment. Standard guidelines will be introduced to ensure the selection process for ground service providers is transparent and fair. The economic licensing process for these services will also be streamlined, with the roles and responsibilities of each service category clearly delineated.

    A collaborative effort

    GACA has worked with stakeholders across the aviation industry to develop and approve these regulations. Backed by an extensive implementation plan and in collaboration with all sector operators, these regulations will be phased in over an 18 month period extending into 2025. It is expected that these updates to economic regulations will deliver improvements, across performance, efficiencies, services and revenues for all national operators, including full-service and low cost airlines.

    A competitive environment

    The updates to the regulations governing the aviation strategy will create a more level playing field for both investors and operators to operate in by driving competition, encouraging innovative growth and allowing for better resource allocation to attract investments and traffic. In addition, an important objective of the policies is to introduce more transparency, in both pricing and commercial relationships designed to improve the financial stability of the sector.

    In the words of His Excellency Abdulaziz Al-Duailej, President of GACA:

    “GACA’s transformation of Saudi Arabia’s aviation economic regulations will drive further investment, growth, and performance across the aviation sector. The regulations will enable the realization of the Saudi Aviation Strategy, which is mobilizing $100 billion in investment from public and private sector sources by 2030.  

    “The regulations create an open, dynamic and competitive market, setting a level playing field for global operators and investors in the Kingdom. These changes will create more competition, choice and value for passengers and consumers .”

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