Nas Holding CEO explains how his airline is trying to cope with the unique challenges in the kingdom
The airline industry is cut-throat. Running an airline in Saudi Arabia, a country that is overhauling its vast infrastructure and with a culture that’s still not entirely in tune with no-frills budget travel, is even more challenging. But Sulaiman Al Hamdan, who runs National Air Services, the holding company to which Nas Air belongs, is unfazed. He’s actively been trying to trim the fat off the budget carrier that's been operating in Saudi Arabia for five years and has tried to make the airline’s operations more efficient in the wake of high oil prices, regional political upheaval and an uneven domestic playing field when it comes to the government subsidies its main competitor gets.
“When the licence was granted neither the civil aviation authority or the company seriously considered the situation,” Hamdan says. “Accepting preconditions to fly to very specific domestic airports as a precondition to getting the licence before you are allowed to fly international was a mistake.”
Saudi Arabia plans to open up its aviation market with the issuing of a third operating licence by the end of this year, for which fourteen companies have applied, to operate both local and international flights. Qatar Airways, Bahrain Air and Gulf Air are among the carriers bidding for the licence. It remains to be seen if a new player in the market will change the dynamics of the aviation industry in the kingdom. A main criticism in Saudi Arabia has been that the fuel subsidy for national carrier Saudi Arabian Airlines and a cap on domestic fares has disadvantaged competitors.
Sama Airlines, another budget carrier that also operated in Saudi Arabia, suspended operations in 2010 after amassing over $300m in losses. Nas Air, which is 37 percent owned by Prince Alwaleed Bin Talal’s Kingdom Holding Co, started operating in 2007 and has not made a profit to date, suffering losses due to higher oil prices and political instability that swept across the Arab world, causing it to withdraw from several countries.
Nas Air currently flies to six destinations within Saudi Arabia and nineteen foreign routes. As part of its restructuring and also as a response to changes in its operational environment when protests swept across the Arab world, it has realigned its business. It withdrew from Syria and Yemen because of political instability. And it also left India to maximise the utilisation of its fleet which will now fly within a three-and-a-half-hour radius from its base in Saudi Arabia. Potential routes include Ethiopia, Iran, and Iraq, which all tie in with that new strategy.
The carrier has also introduced what it terms as a fuel-efficiency programme, which has saved it, in the past ten months of this year, nearly $16m, or about 8 percent of its total fuel consumption. Somewhat astonishingly, jet fuel prices in Saudi Arabia are about 18-20 percent higher than the cost in neighbouring countries which has prompted Nas Air pilots to refuel outside their base.
“Sudan is cheaper than us,” Hamdan says. “When the pilot sees that he has a 50 percent load of passengers he takes more fuel because it’s cheaper.”
These changes are slowly helping the airline decrease its losses and are putting it on target to becoming profitable for the first time since the carrier’s inception next year, Hamdan says.
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