Oman's Salam Air mulling Airbus order amid network expansion plans, CEO says

Exclusive: Budget airline hit by three-month delays on A320 Neo deliveries because of Airbus's supply-chain issues

Visitors take pictures during their visit to Mughsail Beach in Salalah. Randolph Caguintuan / Reuters
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Oman's budget airline Salam Air, which operates an all-Airbus fleet of A320-family aircraft, is weighing an order of up to a dozen Airbus narrow bodies as it seeks to triple the size of its network before a potential public listing.

The airline is evaluating the longer-range A321 jets and the smaller A220s, formerly the Bombardier C Series, Mohamed Ahmed, Salam Air's chief executive, told The National. It will decide on the aircraft type by year-end once the airline finalises traffic rights to new markets and contracts for charter flights carrying oil companies' staff to oilfields within the sultanate.

"We're evaluating all the options," Mr Ahmed said. "There's advantage to sticking to one plane type that fits all, but if business plans prove that having smaller capacity or longer range would bring additional revenue then of course we'd look at it."

Salam Air, owned by Omani private investors and Muscat National Development and Investment Company (ASAAS), started operating in January 2017 and is in expansionary mode before an initial public offering as early as 2024. The airline has drawn up a plan to serve 60 destinations and expand its fleet to 20 aircraft over the next five years, Mr Ahmed said. It currently flies to 20 cities with four leased and owned A320 and re-engined A320 Neo jets. The fleet is expected to swell to nine aircraft by the end of the year after the airline takes delivery of five A320neos in 2019.

The airline is considering an order of A220s, which seats between 100 to 150 passengers depending on the model variant, for shorter routes, oil companies' flights and smaller airports such as Sohar, Doqm, Mosandam and Khasab, Mr Ahmed said.

The A321 is "appealing" for its longer range and larger capacity during peak travel seasons.

The airline, which last year ordered six A320 Neos powered by CFM engines, will be hit with delayed deliveries of the re-engined aircraft this year as Airbus grapples with engine shortages. Salam Air announced five new routes this year – to Riyadh and Kuwait by the end of Ramadan, Tehran after Eid Al Fitr and in Turkey to Trabzone and Sabiha Gokcen airport by July.

"We had even more aggressive plans but Airbus delayed most of the aircraft. We should have received all six A320 Neo aircraft before this summer, but we're only receiving three before summer and three are coming post-summer, so once those aircraft come we'll add more destinations and increase frequencies," he said.

The airline will be hit by a three-month delivery lag this year during the crucial peak summer season when destinations such as Salalah attract Gulf and European visitors who flock to the southern Omani city during the monsoon season.

"Having less aircraft affects us but we will utilise what we have as much as we can," Mr Ahmed said.

The airline is in talks with Airbus for compensation for the delayed deliveries.

“The discussions are always there but whatever compensation they give will not recover the loss of revenue that we would have got if we operated this capacity, because most airlines do a lot of their profit during the summer season," he said.

The airline is not considering a wet lease of additional aircraft to make up for the delayed deliveries because plane lessors have increased prices as airlines with grounded Boeing 737 Max planes seek alternatives.

Salam Air is seeing an increase in passenger demand due to the grounding of the Boeing 737 Max, Mr Ahmed said.

Flag carrier Oman Air has grounded its fleet of five Max aircraft and the UAE's Flydubai grounded 14, prompting the airlines to cancel flights.

Mr Ahmed said there was a spike in demand on routes it operates where other airlines have cancelled services.

If the airline had received its two or three plane deliveries on time and capitalised on the additional demand, it may have reached break-even beforeits target by 2020, he said.

The airline expects to break even and potentially earn a profit by next year under a revised growth strategy overseen by Mr Ahmed, who was appointed 18 months ago.

Salam Air expects to carry more than one million passengers this year, up from 700,000 last year, as it expands its fleet and adds more routes.

The airline, hit by a 30 per cent increase in oil prices last year, has budgeted for fuel prices of $72 a barrel this year and is monitoring the geopolitical situation in the region, Mr Ahmed said.

He said he was hopeful the situation in Syria could be resolved soon and the airline would be able to fly to Damascus once the political and security situation stabilises.

Salam Air, which operates out of Muscat, sees potential in future to add a new hub in Salalah where it could base "a few" aircraft as it becomes a year-round destination, Mr Ahmed said.

The airline may also introduce a new premium class on its aircraft that is a notch above economy class but not a full-fledged business class, he said.

With A320 Neos coming into service, Salam Air is targeting destinations within a six-hour flying range but will not operate low-cost long-haul flights as there are "no successful stories" of that model and the airline is "too young" to consider it.