Low-cost Saudi carrier flynas on Monday signed an $8.6-billion deal with European plane manufacturer Airbus to purchase 80 A320neo single-aisle jets.
Flynas chairman Ayed al-Jeaid said at a ceremony in Riyadh that the deal includes an option for 40 more of the short to medium-haul planes, to cater for what airline executives described as a growing domestic market.
Bander al-Mohanna, the chief executive of NAS Holding, of which flynas is a division, signed the agreement with Fouad Attar, Middle East director for France-based Airbus.
Mohanna told a news conference following the ceremony that the aim of the deal was for flynas to “play a leading role in the market” which he described as “very huge”.
Delivery would begin next year and continue until at least 2026, flynas executives said.
The 10-year-old airline exclusively operates the A320, leasing almost 30 of the aircraft, and its passenger numbers now exceed six million annually, executives said.
The carrier concentrates on the Arabian peninsula and the immediate vicinity within four hours’ flying time.
“Our major focus is to serve the kingdom of Saudi Arabia,” which accounts for 70 percent of the airline’s flights, Mohanna said.
State-owned Saudi Arabian Airlines, known as Saudia, is the dominant player and aims to expand its own fleet to 200 aircraft by 2020.
Saudia flew more than 29 million passengers in 2015, and in June last year placed an $8-billion order with Airbus for 50 planes for domestic flights.
Two new entrants, Nesma and SaudiGulf, have launched domestic flights but Jeaid told the ceremony: “We don’t believe that such competition threatens us.”
– A young market –
Under its wide-ranging Vision 2030 plan announced in April, Saudi Arabia aims to diversify its oil-dependent economy.
Among the measures is development of the tourism sector, privatisation of state-owned services including airports, and a linking of transport networks to position Saudi Arabia as a regional logistics hub.
The plan also calls for an increase in the number of Muslim visitors performing the umra minor pilgrimage to Islam’s holiest sites in Mecca and Medina.
“We expect a lot more traffic just from local pilgrimage and international pilgrimage,” flynas CEO Paul Byrne told AFP after the ceremony.
He said that with around half the kingdom’s airports currently served by flynas, the remainder provide growth potential, as does the kingdom’s youthful population.
More than half of Saudis are under 25.
“There’s a lot of young Saudis now who are going to generate a lot of business for the airlines in the coming years and decades,” Byrne said.
He added that owning planes, rather than leasing, gives the airline more control over its financial future.
Leasing new planes would have come at “a much higher premium,” he said, adding that the flynas purchase schedule calls for a maximum of 10 A320neos to be delivered in a year.
Even before it unveiled its economic reform plan, the Arab world’s largest economy was spending billions of dollars on building and upgrading airports.
Riyadh-based Kingdom Holding Co, a diversified global investor with stakes ranging from hotels to entertainment and banking, owns a 34-percent stake in flynas.
Airbus said last week it had outstripped its own delivery expectations in 2016, closing the gap with Boeing and beating its US rival on orders.
The European manufacturer said it delivered a record 688 commercial planes last year, exceeding its own target.