Saudi Arabia expands Vision 2030 with the creation of a new air freight company
The Saudi Arabian Public Investment Fund, which has assets of more than $925 billion, is negotiating with the world's two leading aircraft manufacturers, Europe's Airbus and the United States' Boeing, to acquire a fleet of cargo planes, with the aim of creating a new air cargo company.
This move by the Saudi sovereign wealth fund, revealed by the Al-Arab newspaper, is part of Vision 2030, the strategic plan launched by the Saudi government and headed by Crown Prince Mohammed bin Salman to diversify its economy and reduce its dependence on oil, and aims to turn the country into an international logistics hub to dispute the hegemony of its neighbours Dubai (United Arab Emirates) and Doha (Qatar).
Boosting air transport
The Saudi Public Investment Fund's talks with Airbus and Boeing are at a very early stage and have not yet been confirmed by either player. However, this business move is logical and is related to the strategy to turn Saudi Arabia into a major player in international air transport, rivalling airlines from neighbouring countries such as Qatar and the United Arab Emirates.
Among the objectives of the Vision 2030 plan is the development of passenger and freight air transport, turning Saudi Arabia into an international logistics hub, attracting investment, supporting trade and fostering economic development, providing the country with sustainable economic benefits.
In this sense, Saudi Arabia has already taken the first steps in the air sector, with the creation of a new company, Riyadh Air, which would be served by this new air cargo company.
Other measures to boost the aviation sector include the creation of an aircraft leasing company, a helicopter company, investment in a Saudi engineering unit and the development of one of the world's largest airports in the Saudi capital, Riyadh.
A growing sector
According to the latest figures released by the International Air Transport Association (IATA), air freight figures rose by 14% year-on-year in June, the seventh consecutive month of double-digit growth.
Experts suggest that growth in both passenger and freight air transport is on track to surpass the record levels reached in 2021.
It is not surprising that Saudi Arabia wants its share of this business, taking advantage of its privileged geostrategic position, at the crossroads of routes linking three continents: Europe, Africa and Asia. Hence the creation of the aforementioned airline.
Riyadh Air's CEO is Tony Douglas, a British executive with extensive experience in the sector, who has headed Etihad Airways and London Heathrow Airport, and was founded with the aim of competing with Etihad, Emirates and Qatar Airways.
In March 2023, the company presented a first order to Boeing, consisting of 39 787-9 Dreamliner aircraft, with the possibility of acquiring an additional 33 aircraft.
This would be followed by the purchase by the existing Saudi Airlines of a further 39 aircraft of the same model, with the possibility of 10 more. The Jeddah-based airline, founded in 1945, will soon be owned by the Saudi sovereign wealth fund, which intends to focus more on passenger transport, especially in connection with the annual Muslim Hajj pilgrimage to Mecca.
Focus on logistics
This strategy to turn Saudi Arabia into a global logistics hub, announced by Crown Prince Mohammed bin Salman in July 2022, involves improving the capacity of the country's airports, ports and road network.
The goal is for the Saudi logistics sector to reach a capacity of more than 4.5 million tonnes of cargo by the end of the decade.
To this end, the Saudi General Authority for Civil Aviation is developing a modern airport system to improve services for both passenger and freight transport. The country has 22 airports, of which four are international, eight are domestic and ten are regional.
One example is King Khalid International Airport in Riyadh, which has launched a model called Cargo Village, with an advanced logistics platform, which will reach 1.6 million per year when it starts operating at full capacity, or King Fahd International Airport in the city of Dammam, which will have a cargo capacity of up to 650,000 tonnes per year.
Vision 2030
This commitment to air transport is part of the Vision 2030 strategy, which aims to diversify the Saudi economy and reduce its dependence on oil revenues by focusing on sectors such as tourism, technology, logistics, mining and sports.
To date, the Saudi Public Investment Fund has a highly diversified investment portfolio, with a presence in multiple sectors. In the technology sector, for example, it has invested $3.5bn in Uber; $45bn in SoftBank's Vision Fund; owns 60% of Tesla rival Lucid; and has a majority stake in augmented reality startup Magic Leap.
In sports, he injected billions into the creation of LIV Golf, a structure that rivals the PGA, and led the acquisition of Newcastle United, an English Premier League team, for $415 million.
And in infrastructure and transport, it invested $20 billion in a Blackstone infrastructure fund, as well as taking a stake in Carnival, the world's largest cruise operator, and expanding its stake in London's Heathrow Airport.