Air Arabia alliance wins bid to operate low-cost airline in Saudi Arabia

New airline will operate from King Fahd International Airport in Dammam

Air Arabia aircraft. Air Arabia has joined a consortium to launch a new low-cost airline based in Dammam as part of Saudi Arabia’s efforts to boost connectivity and tourism. Photo: Air Arabia

UAE carrier Air Arabia is part of an alliance that won the rights to operate a new low-cost airline in Saudi Arabia to boost air connectivity in the kingdom.

The new consortium will operate the airline from the King Fahd International Airport in Dammam and provide competitive travel options for passengers, the Saudi General Authority of Civil Aviation (GACA) said in a social media post on X on Sunday.

Egypt's Nesma and Jeddah-based Kun Investments Holding are part of the consortium that won the bid, according to the post.

The airline is expected to enhance air connectivity in the eastern region.

By 2030, the new Air Arabia alliance will operate 45 aircraft and will serve 24 domestic and 57 international destinations, the social media post said.

It will also transport up to 10 million passengers annually and create 2,400 direct jobs by 2030.

“The establishment of a new low-cost airline in Dammam further builds Saudi Arabia’s position as the world’s biggest aviation growth story, with the proposals received reflecting strong global investment in Saudi aviation," Minister of Transport and Logistics Services Saleh Al Jasser said.

"This award will drive further growth in support of Vision 2030 and the National Transport and Logistics Strategy.”

The award follows a competitive tender process initiated by Saudi Arabia’s GACA, involving proposals from international, regional and domestic airlines to establish a new Dammam-based national airline with majority Saudi ownership, the authority said.

The new low cost airline aims to enhance aviation sector’s competitiveness as well as expand travel options and increase passenger numbers, Abdulaziz Al Duailej, president of GACA, said in a separate post on X.

It is also meant to support the growth of economy and tourism in the eastern region of the kingdom, he added.

The tendering process for the airline had attracted other bidders. Kuwait’s Jazeera Airways had also placed a bid to launch the low-cost airline from Dammam, its chief executive told The National in an interview last year.

"We do believe we have the best credentials and have submitted the best plan but this is a tendering process so it can go either way," Barathan Pasupathi had said in September.

Saudi Arabia, the Arab world's largest economy, aims to diversify its economy away from oil as part of Vision 2030 programme.

The kingdom's plan is to become a travel hot spot, having invested $800 billion to develop the sector and set a revised target of attracting 150 million visitors by the end of the decade.

In 2023, Saudi Arabia also announced the creation of a new national airline Riyadh Air, as the kingdom seeks to develop into a global transport and logistics hub, attract tourists and diversify its economy.

Riyadh Air is fully owned by Saudi Arabia's Public Investment Fund and is expected to begin its first commercial flight in the fourth quarter of this year.

King Fahd International Airport, Dammam, Saudi Arabia. Courtesy Damman Airports Company

Competitive aviation market

"Air Arabia would be stepping into a very competitive Saudi landscape," said Saj Ahmad, chief analyst at StrategicAero Research told The National.

"With flynas, flyadeal, Saudi Airlines as well as Riyadh Air all competing for domestic, regional and international traffic, Air Arabia will have to carve out a niche to ensure success."

However, Air Arabia has a "suite of regional hubs so there’s a good chance it can use its regional footprint to augment its planned Saudi operations", he added.

"Longer term, the evolving Saudi market will change and it’ll be interesting to see if Air Arabia elects to spread beyond Dammam into more competitive cities like Jeddah and Riyadh and set up camp there."

Expansion of Dammam airport

Separately, Saudi Arabia on Sunday, also launched the Dammam Airports Strategy and a package of integrated development projects valued at more than 1.6 billion Saudi riyals ($427 million), including 77 infrastructure projects aimed at enhancing operational efficiency and improving the passenger experience.

The strategic plan aims to accommodate more than 19.3 million passengers annually at King Fahd International Airport by 2030, doubling the number served in 2022, the Saudi Press Agency reported.

It also seeks to significantly expand air cargo capacity to over 600,000 tonnes a year.

Future developments include an expansion of the airport’s operational capacity, increasing aircraft movements to 77 per hour and boosting annual passenger capacity to 32 million.