In recent years, we’ve seen an unbelievable number of new long haul routes to Riyadh, Saudi Arabia (RUH). The narrative around this growth is interesting, but what’s really driving all of this new service?
In this post:
The argument for more flights to Riyadh, Saudi Arabia
Within the next year, we’re supposed to see the launch of Riyadh Air, an ambitious airline startup that has the goal of connecting Riyadh to the world. The government is funding this project, as part of Saudi Vision 2030, with the goal of diversifying the economy, including greatly increasing tourism (early reports suggest that the country may have been a little overly optimistic).
There are some really smart people running Riyadh Air, and the argument they’ve made for the airline is simple — essentially, Riyadh is a way underserved aviation market without enough direct links to global points, and that needs to change. Riyadh Air CEO Tony Douglas has gone so far as to say that it’s “haram” and “totally, utterly unacceptable” that “the number one premium passenger for Qatar Airways, are Saudi nationals.”
Douglas makes a fair point, and indeed, Saudi Arabia is a much more populous country than some of its Gulf neighbors (Bahrain, Kuwait, Qatar, UAE, etc.), so one would think there would be more demand for the market to be served.
But here’s the big question — if Riyadh Air is launching soon, why are we also seeing a bunch of new airlines launch flights to Riyadh, regardless of whether or not they have any planned partnership with Riyadh Air? If Riyadh has been so underserved, why have airlines only been adding service there in the past year or two, when the market will no doubt get significantly more saturated in the near future?
Sure, we’ve seen Air France and Virgin Atlantic launch flights to Riyadh, and Delta claim it will launch flights to Riyadh soon. But all those airlines plan to partner with Riyadh Air. But we’ve seen a countless number of other airlines launch flights recently. Just look at China, as one small example — Air China, China Eastern, and China Southern, have all launched Riyadh flights recently. What’s actually going on here?
The Saudi Air Connectivity Program is the answer
To figure out why so many airlines are suddenly launching flights to Saudi Arabia, just follow the money. No, I’m not necessarily talking about the money in terms of passenger demand generating revenue, but instead, the money Saudi Arabia is willing to give airlines for flying to the country.
The Air Connectivity Program (ACP) is Saudi Arabia’s program that incentivizes airlines to fly to the country. As Saudi Arabia’s Tourism Minister has described this:
“The main purpose is to create direct flights to our main target markets. The program will compensate airlines to cover their losses from flying direct flights to these very important hubs for us. We have to negotiate with every carrier to size it.”
Saudi Arabia is currently investing tens of billions of dollars in its aviation sector, and the Air Connectivity Program is part of that. It seems that the exact terms that airlines receive varies, but the concept seems pretty clear — fly to Saudi Arabia, and you won’t lose money.
In fairness to airlines, the concept of some sort of incentives to launch new long haul service is nothing new. However, it sure seems like the scale of incentives being offered here are on a different level than what we typically see.
I think Delta is a funny example to look at. It’s the world’s second most profitable airline (I know that hurts, I’m sorry), yet the carrier’s ultra long haul service adds seem exclusively focused on serving joint venture hubs, on chasing subsidies. Delta’s last non-joint venture ultra long haul route addition was to Brisbane (BNE), a market that’s providing massive incentives to airlines at the moment.
Now Delta is adding Riyadh service, again, with significant subsidies. How times have changed compared to a decade ago, when Delta executives complained the loudest of unfair competition due to subsidies.
Anyway, it’s going to be fascinating to see how Riyadh service evolves over time, given the massive amount of capacity growth the airport is seeing, combined with the launch of a new airline. The amount of capacity that the government is trying to force almost seems counterintuitive. It’s going to cause airlines to do quite a bit of capacity dumping, with super low fares, and they’ll be competing directly with government owned Riyadh Air.
Bottom line
It’s no coincidence that we’re seeing so much new service to Riyadh, Saudi Arabia. It’s specifically because the Saudi Air Connectivity Program is providing incentives to airlines, to the point that the government covers losses of this kind of service.
With the amount of capacity being added, and especially with Riyadh Air launching in the near future, it’s going to be interesting to see how this amount of capacity expansion plays out.
How do you see this Riyadh air service situation evolving?
None of the Arab monarchies, plus the House of Windsor, followed the protocols of succession. MBS should never be a crown prince. It should have been his father's next brother in line. After he ordered "house arrest" on other royal family members in Ritz Carlton, imprisoned religious leaders and banned mutawa, he now faces numerous rivals and enemies from within. He might become " the last Sha" of House of Saud. He will bankrupt the...
None of the Arab monarchies, plus the House of Windsor, followed the protocols of succession. MBS should never be a crown prince. It should have been his father's next brother in line. After he ordered "house arrest" on other royal family members in Ritz Carlton, imprisoned religious leaders and banned mutawa, he now faces numerous rivals and enemies from within. He might become " the last Sha" of House of Saud. He will bankrupt the country while pursuing his illusive dreams to open SA for tourism: $2B investment in Kushner's equity funds, the virtual Noem city, LIV golf league, airline startup, etc.. There is a reason why US President must be at least 45 years old--maturity. Hoping 70 years old is the cut off age for all politicians as well. King Salman might have been in the hospice or freezer when the world did not see him greet Trump back in March.
US carriers and news media CEOs and politicians are joined at the hip because their main job is PR. They will scapegoat everyone to deflect their flaws and errors. The unfair competitiveness is not primarily due to labor costs. The obscene executive compensation packages are the elephant in the room. Is there a difference between
easy access to government credit line vs government bailout or it is just semantic?
why are people going to the middle east/israel? They abuse people's human rights, they commit genocide, they kill people for being gay. Surprised they haven't arrested ben for being gay
Same reason they go to The United States of America, where people die in ICE custody. The horror stories are outliers. Ben has written adequately on the topic of your comment and needn't defend himself repeatedly. As a gay Canadian, I wouldn't hesitate to visit Saudi Arabia, although I'm currently boycotting all US travel other than transit on awards.
I mean, they can simply offer free fuel for th ereturn trip. That would automatically reduce fuel cost to half so only need to fill in half the plane to make profit
It's actually not an unreasonable strategy: lure in major carriers with subsidies, contingent upon various degrees of partnership with Riyadh Air.
Then when RX (finally) launches, it'll be able to immediately sell major destinations all across the globe, under its own code, despite most of the flights being operated by foreign carriers.
Not a conventional start, but it's the only way they could hope be even remotely competitive with EK and QR, for probably the...
It's actually not an unreasonable strategy: lure in major carriers with subsidies, contingent upon various degrees of partnership with Riyadh Air.
Then when RX (finally) launches, it'll be able to immediately sell major destinations all across the globe, under its own code, despite most of the flights being operated by foreign carriers.
Not a conventional start, but it's the only way they could hope be even remotely competitive with EK and QR, for probably the first decade or more.
Yes, this makes sense to me as well.
Hmm, who are the target customers to go to Riyadh?
Not sure there is much of a leisure play here. Maybe new business and government?
There may be a few transiting folks to the subcontinent/Asia especially if Riyadh Air adds more destinations east.
For better or worse, the Saudis are actively trying to turn Riyadh and parts of Saudi Arabia into a major tourism and non-oil business destination on par with Dubai and Doha (let alone the likes of New York/London/Paris/Tokyo).
That is why they have become so big into sponsorship (or outright ownership) of golf, soccer, and F1 through Riyadh Air, the PIF, and Aramco. Just as UAE and Qatar-owned/affiliated entities have been doing for the latest...
For better or worse, the Saudis are actively trying to turn Riyadh and parts of Saudi Arabia into a major tourism and non-oil business destination on par with Dubai and Doha (let alone the likes of New York/London/Paris/Tokyo).
That is why they have become so big into sponsorship (or outright ownership) of golf, soccer, and F1 through Riyadh Air, the PIF, and Aramco. Just as UAE and Qatar-owned/affiliated entities have been doing for the latest 15-20 years. They also want to host the 2034 World Cup as a critical part of this given that it's one of the two biggest events on Earth.
"The amount of capacity that the government is trying to force almost seems counterintuitive."
Trying to make sense of the things a government that is building NEOM does is not going to go well.
I'll not be going to Saudi Arabia because, like Jamal Khashoggi, I have a severe bone saw allergy
Sure, though that was in Turkey, not Saudi Arabia.
An embassy building, yes. But still.
A pedantic and useless distinction. Embassies are sovereign territory, and if they'll do it there, I'm quite confident they'll do it at home.
Brainwashed by propaganda.
How many people still don't realize where it happened.
Lucky you, even if you're also allergic to brain saw, you'll be fine because they have a hard time finding where to saw.
> How times have changed compared to a decade ago, when Delta executives complained the loudest of unfair competition due to subsidies.
To be fair, there is a massive difference in subsidies that ensure an unprofitable operation continues and is able to dominate entire regions of travel at costs that simply aren't possible for an unsubsidized airline to operate and subsidies available broadly to any airline in order to ensure connectivity to a region. For...
> How times have changed compared to a decade ago, when Delta executives complained the loudest of unfair competition due to subsidies.
To be fair, there is a massive difference in subsidies that ensure an unprofitable operation continues and is able to dominate entire regions of travel at costs that simply aren't possible for an unsubsidized airline to operate and subsidies available broadly to any airline in order to ensure connectivity to a region. For example, EAS in the US is a subsidy that is based around connectivity, even if it's not broadly available to every airline, whereas airlines being subsidized by their states (such as the ME3) can create unfair competitive advantages *or* create a race to the bottom on fares that make it so nobody else can compete on certain routes. The same is applicable for state-owned airlines where the "subsidies" (in the form of taxpayer-funded losses) exist only for that airline with the hope/expectation that tourism taxes will more than offset the losses on the aviation side.
@ Arthur -- I largely agree with you, but I'm not sure that's necessarily relevant here? For example, Delta was campaigning most heavily against Emirates, and the airline wasn't unprofitable. The government was simply the primary shareholder, which obviously comes with access to more attractive financing, etc.
and let's not forget that US airlines - along w/ the entire US economy was heavily "subsidized" during covid.
The irony is that DAL and LUV are the two airlines that could have survived; they pulled down tens of billions of dollars in lines of credit as soon as the financial system was "unlocked" which affected lots of industries.
AAL's CEO was credited for leading the charge to Washington to get covid handouts,...
and let's not forget that US airlines - along w/ the entire US economy was heavily "subsidized" during covid.
The irony is that DAL and LUV are the two airlines that could have survived; they pulled down tens of billions of dollars in lines of credit as soon as the financial system was "unlocked" which affected lots of industries.
AAL's CEO was credited for leading the charge to Washington to get covid handouts, AA was the most fragile and got the most amount of money.
so, yes, there is a difference between complaining about state supported unprofitable airlines and market-specific opportunities that the western financial system allows governments and local/regional/state economic development organizations to provide to companies to get what they want.
and DL's primary beef was with the Import-Export bank which gave low interest loans for new aircraft built by Boeing which US airlines could not access; the same was true for European airlines and Airbus planes. There is a point at which companies of any size shouldn't need any form of taxpayer assistance - but that isn't the reality.
"subsidies that ensure an unprofitable operation continues and is able to dominate entire regions of travel at costs that simply aren't possible for an unsubsidized airline"
Are you referring to US government bailout money handed to AA DL UA?
#hypocrites
"yet the carrier’s ultra long haul service adds seem exclusively focused on serving joint venture hubs, on chasing subsidies"
Isn't this specifically why Delta is so profitable? They don't do any "sexy" flying and just focus on boring, low risk, high reward flying.
It's not a surprise that the top 10 international stations for Delta include mostly JV partners hubs like ICN, GRU, etc.
Fun fact is that SEA is the only top 10 international...
"yet the carrier’s ultra long haul service adds seem exclusively focused on serving joint venture hubs, on chasing subsidies"
Isn't this specifically why Delta is so profitable? They don't do any "sexy" flying and just focus on boring, low risk, high reward flying.
It's not a surprise that the top 10 international stations for Delta include mostly JV partners hubs like ICN, GRU, etc.
Fun fact is that SEA is the only top 10 international station for Delta that is US based, despite all the flack it gets. (Yes, SEA outperforms even the interior hubs on international)
It's also not accurate - ATL-DEL which hasn't been announced any more than LAX-HKG - is not to a JV partner hub.
I don't think RAK is subsidizing either DL or UA services.
If anything, the message DL is sending specifically to a certain Chicago based airline - is that DL is not playing second fiddle to anyone in the international arena esp. since DL handedly leads UA in the domestic marketplace including as the...
It's also not accurate - ATL-DEL which hasn't been announced any more than LAX-HKG - is not to a JV partner hub.
I don't think RAK is subsidizing either DL or UA services.
If anything, the message DL is sending specifically to a certain Chicago based airline - is that DL is not playing second fiddle to anyone in the international arena esp. since DL handedly leads UA in the domestic marketplace including as the largest airline at LAX and in NYC.
and to your latter point, DL IS a domestic and international airline so having someone pick out the domestic flights and not understand how airline revenue is prorated at hubs
What are you blabbering on about LMAO?
Q1 2025 results (UA will release Q2 results in 2 days) - passenger revenue:
UA domestic rev: $7.2B
UA intl rev: $4.7B
UA total rev: $11.9B
DL domestic rev: $8.1B
DL intl rev: $3.4B
DL total rev: $11.5B
The gap at least in Q1 2025 between UA and DL in intl passenger revenue in UA's favor exceeds UA and DL in domestic passenger revenue...
What are you blabbering on about LMAO?
Q1 2025 results (UA will release Q2 results in 2 days) - passenger revenue:
UA domestic rev: $7.2B
UA intl rev: $4.7B
UA total rev: $11.9B
DL domestic rev: $8.1B
DL intl rev: $3.4B
DL total rev: $11.5B
The gap at least in Q1 2025 between UA and DL in intl passenger revenue in UA's favor exceeds UA and DL in domestic passenger revenue - not to mention you can throw out all the numbers about alleged DOT profitability by region, but the net result was that UA was more profitable than DL in Q1 2025 so at least one large portion of UA's network is performing much more profitably than DLs given DL has a far more lucrative credit card contract.
So "not playing second fiddle" and other odd claims don't really hold any message - DL's lead at LAX is marginal (4% market share) and has declined since 2022. It only recently took the lead in market share in NYC, and this is expected to be temporary as EWR has operational restrictions - let's revisit in a year or so if it still holds.
Regardless both airlines have taken strong measures and are performing well, but UA is the leading US intl airline by a distance (with more incoming planes that will build that advantage) while DL has been historically the most profitable airline and typically well-run (although UA has bridged most of that gap). No need to throw stones at each other when neither airline can cash them in.
One thing that needs to be factored in UA's numbers is that it still has outstanding labor agreements that need to be included in costs (i.e. cabin crew). Once UA and DL are on the same employee cost level, that's when we can see the true profitability gap (if any) between UA and DL.
Once Delta is fully unionized, like United, with all the work rules and inability to easily fire employees like Delta can, then we'll see true profitability comparisons between Delta and United. Until then, United is more than welcome to benefit from the cumbersome processes of the National Mediation Board and union negotiations under the Railway Labor Act just like Delta has benefited from non-unionization financially since their merger with NW.
Personnel costs for a unionized...
Once Delta is fully unionized, like United, with all the work rules and inability to easily fire employees like Delta can, then we'll see true profitability comparisons between Delta and United. Until then, United is more than welcome to benefit from the cumbersome processes of the National Mediation Board and union negotiations under the Railway Labor Act just like Delta has benefited from non-unionization financially since their merger with NW.
Personnel costs for a unionized labor force go far above simple wage comparisons. The contracts mandate many things that cost a lot of money -- items Delta can do if they want, on their own time, or never.
there are several issues here.
1. Saudi Arabia realizes it was missing out economically and in many other areas. MBS and others are moving the country forward. Specific to aviation, they have been leaking a lot of premium revenue to others which is just as true for India.
2. Riyadh Air knows it is starting after other Gulf carriers and is building an ecosystem of airlines to achieve its purposes - a stark contrast...
there are several issues here.
1. Saudi Arabia realizes it was missing out economically and in many other areas. MBS and others are moving the country forward. Specific to aviation, they have been leaking a lot of premium revenue to others which is just as true for India.
2. Riyadh Air knows it is starting after other Gulf carriers and is building an ecosystem of airlines to achieve its purposes - a stark contrast to the strategies used by other Gulf airlines that are trying to be one side fits all and do not even participate in alliances
3 There were ample charges that other Middle East carriers were subsidized so, if anything, RX is just copying what other airlines got from their governments.
4. Route specific subsidies continue to exist just as there are subsidies by US and foreign states to draw manufacturing plants.
5. DL has benefitted and been burned by subsidies, including having PIT decide they wanted LHR service in addition to DL's subsidized PIT-CDG service which caused DL to pull out. Some of the routes that DL is starting under some form of subsidies were subsidized for other carriers including SFO-BNE on UA.
6. Some governments continue to offer subsidies including apparently DL for LAX-MEL service even though UA and QF serve the route and also apparently for DL LAX-HKG service even though UA and CX serve the route.
and DL employees are some of, if not the highest paid in the world. Given that fuel prices - one of the top expenses besides labor is the same for everyone - ,it isn't hard to make more profits if you pay your people less, a lesson that UA is learning.
"and DL employees are some of, if not the highest paid in the world. Given that fuel prices - one of the top expenses besides labor is the same for everyone - ,it isn't hard to make more profits if you pay your people less,"
Delta pays what they deem a market rate to their non-union members, just like Emirates. Your excuses don't work here. The revenue and labor markets are different in Dubai vs Atlanta.
the market rate is clearly less than what DL pays = that is definitional since DL was the carrier that has initiated every pay raise for its union and non-union workforce since covid.
And the market rate in the UAE is less than what it is in the UK or US. also basic economics.
The comparison is with AA, UA and WN which are DL's direct peers. one of those 4 has SIX amendable labor contracts while the other 2 are current on all of their contracts.
Yep
And emirates is more profitable than delta and that profitability is based on their revenue and labor market, just like delta in their revenue and labor market
This is one of my alt accounts
—The real Julie
Not Tim Dunn posing as someone else again... "Julie"
You need mental help, Tim
you two and others can work it with Ben.
none of you are smart enough to register your username with him and the only question is: what you are trying to hide?
And yet Ben has said you, Tim Dunn, directly used fake names to get around his ban of you. What were you trying to hide?
This is a blog site. And a good one. It's amusing when someone so desperately wants to use my name (aka. you, Tim). And this is a commenting site.
You aren't allowed on the one many of us use -- "the kiddie table" as you put it. Banned,...
And yet Ben has said you, Tim Dunn, directly used fake names to get around his ban of you. What were you trying to hide?
This is a blog site. And a good one. It's amusing when someone so desperately wants to use my name (aka. you, Tim). And this is a commenting site.
You aren't allowed on the one many of us use -- "the kiddie table" as you put it. Banned, in fact.
How many fake usernames have you used over the years? Sometimes you claim Tim Dunn is your real name on your drivers license then you reverse yourself and say it is not and that it doesn't matter what your real name it.
Calm down, Timmy. You of all people can't criticize others for usernames given your documented history of using MULTIPLE ones to get around bans and to agree with yourself. but nice attempt at taking the high ground as you watch the rest of us from the ditch.
--The actual Julie (not Tim trying to reply to himself)
Hopefully overcapacity results in plenty of premium award availability.
From my (limited) understanding the largest chunks of demand through the Middle East are people transiting through from South Asia or the Africa. Are there really that many travelers to sustain all this transit traffic through DXB, AUH, DOH, and now RUH? If no then at some point this house of cards has to fall somehow, right? Other than Dubai who really is going to these transit hubs as a travel destination?
Riyadh is the capital city for a rich country of 33 million. If they're successful in diversifying their economy at all I'm sure they'll have no problem housing a home airline (though probably not two).
It will be interesting to see what happens when Riyadh Air starts flying the same routes that the airlines mentioned and receiving subsidies fly. I am guessing the loss making top up will evaporate.
I am also curious as to why Riyadh Air needs to fill the void of an airline for Saudi nationals? Saudi Arabia has a national airline already - Saudia. Why did the government not just invest and expand and rebrand an airline that already exists?
I think they are targeting a different client base. I think the rationale for launching Riyadh Air is the fact that Saudia is more of a traditional Islamic airline. There is nothing wrong with that, but it might not be the best airline when it comes to catering to western tourists. Going with a newer airline that can focus on the tourism aspect makes the most sense.
Not to be deterred, American Airlines has also jumped in on the action by adding another flight to Albuquerque New Mexico
(I know that hurts, I’m sorry) LOL. Sadly, sociopaths don’t have emotions, Ben.