Saudi Arabia’s Public Investment Fund (PIF) has firmed up its new airline plan, outlined last September as “RIA”, with an official launch of Riyadh Airlines and an aircraft order valued at US$35 billion.

The new flag carrier will receive its first wide-body aircraft and launch its first international flight in early 2025. Riyadh will be the company’s operational hub, and will connect the Saudi capital to over 100 destinations globally by 2030, PIF said. Previously, PIF was reportedly negotiating an order for 40 A350 jets from Airbus and it is also now talking to Boeing.

PIF hopes the new airline will increase international transit passengers from under four million in 2021 to 30 million by 2030. The fund claims that the airline is expected to add US$20 billion to non-oil GDP growth, and create more than 200,000 direct and indirect jobs.

Riyadh Air is the Kingdom’s second national carrier after Jeddah-based Saudia, and is being set up to rival the Gulf region’s other sovereign wealth fund-owned airlines. It forms part of a planned US$100 billion in aviation investment under Saudi Arabia’s Vision 2030 program, the brainchild of the Kingdom's de facto ruler Crown Prince Mohammed bin Salman (MBS).

The creation of the new airline follows the launch of AviLease, an aircraft leasing company, which the fund says will become a “core element” of the Kingdom’s expanding aviation ecosystem. PIF said that the company will “scale through purchase-and-lease-back transactions, secondary portfolio acquisitions, direct orders from aircraft manufacturers, and corporate acquisitions.”

PIF has also mooted plans for a third airline, which would serve the planned US$500 billion new metropolis, NEOM, in the northwestern Tabuk province. The third flag carrier will operate exclusive routes to cities in Europe and Asia would make NEOM a prime destination for international travellers. However, this airline’s formation has yet to take shape – if it ever does come into being.

Sovereign wealth funds in the GCC are bolstering their airlines in their competition to lead in global air transportation. In October, the Abu Dhabi government transferred full ownership of its national carrier to ADQ. Up until then, Etihad was the only GCC airline not overseen by a SWF, but directly by the government via the Crown Prince Court.

The role of SWFs in supporting domestic airlines was evident during the pandemic, which saw bailouts received by SWF-owned carriers exceed US$ 19 billion, led by QIAICDTemasek and KhazanahADQ has the challenge of integrating Etihad with a well-diversified portfolio, and of making it profitable. For that task, it hired Antonoaldo Neves, who has undertaken similar exercises at Brazil’s Azul and Portugal’s TAP in the past.

The UAE has four domestic airlines, including low-cost flydubai (owned by ICD) and Sharjah-based Air Arabia (partly owned by SAM and partly listed). Kuwait and Oman also operate budget airlines in addition to their main carrier: Jazeera Airways in the former, owned by the Boodai family and listed locally; and SalamAir in the sultanate, jointly owned by OIA and the pension funds. Gulf Air, once the key link between the UK and the Gulf, has remained small.

Related funds PIF
Related tags Infrastructure Aviation