Low-cost Saudi carrier Flynas has struggled amid a skewed competitive landscape and regulatory challenges. With the entrance of two new rival airlines next year, things are only going to get tougher for chairman Sulaiman Al Hamdan
Sulaiman Al Hamdan didn’t take part in the Dubai Airshow free-for-all conducted by the likes of Emirates, Etihad and Qatar Airways. Instead of launching billion-dollar contracts, the chairman of Saudi Arabia’s Flynas was instead trying to squeeze a couple more of the modestly sized Airbus A320 jets out of one of the carrier’s lessors.
This kind of wheeling and dealing is part and parcel of how Al Hamdan runs low-cost Flynas, which since it launched eight years ago has battled a skewed competitive landscape that generally favours government-owned Saudi Arabian Airlines (Saudia).
With two new carriers set to begin services in the Gulf country this year though, the rivalry in Saudi Arabia’s aviation market is set to intensify further. But for Al Hamdan, the success of Flynas has always relied on beating the odds.
Set up in 2007 to operate some of the kingdom’s most under-served domestic routes, Flynas had a challenging start to life, Al Hamdan recalls. “It was a very, very difficult start for the airline during the first three years, for very good reasons,” he says.
Among these challenges has been the air fare cap that Saudi aviation authorities impose on domestic services, designed to make air travel affordable in a country that is geographically large but lacking in basic transport infrastructure. It has also had to contend with an uneven competitive landscape, with larger incumbent Saudi Arabian Airlines offered generous subsidies on jet fuel, which are not extended to Flynas.
Al Hamdan says that in 2010, in co-operation with rival carrier SAMA, he presented a case to Saudi Arabia’s Supreme Economic Council to reassess the situation over subsidies and ticket caps. He is still waiting for his answer, while SAMA has since gone bankrupt.
“I think there is so much debate and discussion. There are good intentions, but the decision-making is so slow,” Al Hamdan claims. “Basically, we can’t wait any longer, and we felt that if [a decision] comes, it comes, and it will be welcome, and if it didn’t, that’s fine.”
Since it began operations nearly eight years ago, Flynas has yet to turn a profit, as issues over subsidies and fare prices have consistently pressurised margins. The carrier had previously forecast that it would close 2013 in the black, but Al Hamdan says he is no longer sure if this will be the case, noting that the airline suffered during the normally busy Umrah season when the Saudi government slashed the quota for foreign pilgrims.
“Luckily, we’ve managed to survive basically because we’ve got very committed shareholders who believe in this airline, who’ve kept injecting and funding its operation,” Al Hamdan adds.
The situation regarding fuel for the airline could be described as absurd. It is not uncommon for fuel expenses to account for up 50 percent of a carrier’s operating costs depending on the oil supply climate. However, Al Hamdan says that the price of jet fuel in Saudi Arabia, the world’s largest oil producer, is so crippling for Flynas that the airline is forced to purchase from outside of the country.
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