Operating Turboprop Aircraft, Research Paper Example

Would Operating turboprop aircraft by Saudi Airline in Saudi Arabia domestic be feasible?

Within the last year over three billion passengers have taken a trip on an aircraft around the world. While some travel for business, and others for pleasure, air travel has been growing in popularity, as countries start to add other types of aircraft. The fastest growing industry within the world is tourism, and it is facilitated by the growth in aviation. Most keenly felt in the Asia-Pacific region, as well as a growing number in the Middle East region, a boom in air transport is helping to emerge the middle classes around the world. Saudi Arabia’s economy has expanded tremendously throughout the last decade. With the boom from tourism which has helped to grow their middle class economy, adding to their aviation industry is the next thing. Currently, the aviation industry in Saudi Arabia is expanding, as there is an increase demand for domestic travel. With the increase in demand for travelling, more aircrafts seems the feasible route, however the purpose of this paper is to explore the operations of the turboprop aircraft for the dominate airline in Saudi Arabia. By looking at the economy, the market, and the aviation industry, we can make a plausible answer.

Saudi Arabia’s Economy and Market

Saudi Arabia has become the go to destination trip for many international tourist, and have attractive worldwide reputation and fame. Their population is measured at over 30 million, in which nearly 10 percent are foreign residents. Saudi Arabia boasts a diverse geography with deserts, mountain ranges, grasslands, and forests. Saudi Arabia experiences very little rain, but temperatures can get below freezing, as well as become exceedingly hot, yet have become a highly sought vacation location. They have also created a high level of creation and innovation, in which captures there infusion of authentic, natural, and traditional quality products. They provide a wide range of exports that includes waffles, chocolate snakes, chocolate cakes, chocolate candy, macaroons, and others. In looking at Saudi Arabia’s market, which is a free market, there has been a growing focus on global confectionery manufacturer, in which has experienced double digit growth annually. Between 2005 and 2009, the percentage in sales has increased nearly 15%. For the Middle East, chocolate ales is the biggest market in the country with sales that exceed over $5 billion. Due to these increases in sales, and Saudi Arabia being dubbed the chocolate capital, the average income per capita has also increased. This increase in income has allowed for an increase in purchasing expenditure and power on luxury products.

Saudi Arabia is the 20^th largest import marketer in the world, and the 19^th largest exporter, in which they create over $6 billion in revenue for the export of non-oil products. Their primary exports includes crude oil, non-crude oil, petroleum gases, acyclic alcohols, and 10^th largest is the aircraft engines. Their primary imports are passenger vehicles, aircraft engines, technological devices, medicine, trucks, and other industrial materials. As their imports and exports are growing, there is also a rapid growth in the commercial sector. There are geographically centered around the crossroads of Africa, Asia, and Europe, as well as around southwest Asia.  The country itself is rich in primary raw materials for industrial development, manufacturing, gas, oil, and minerals. With their location, the issue of the equal or fair allocation of resources for the world’s citizens. The government however lays a central role in the economic and industrial development, in which the Ministry of Economy and Planning, oversee the social and economic developments for economic goals for long-term. Additional sectors in the economy are overseen by specific ministries such as finance, communications, transportation, energy, and agriculture.

Saudi Arabia’s Aviation Industry

For Saudi Arabia’s economy, the private sector has played a large role in which for the gross domestic product (GDP) accounts for almost 50%, with expectations to increase, as the country continues to receive foreign investment. For Saudi Arabia’s aviation industry, with the growth in the public and private sectors, it is expected to increase significantly. The aviation industry around the world is increasing each year, and is fundamental in supporting the economic and social growth of national economies. Particularly for the Middle East, aviation is tied closely to the region’s economic growth. Due to the surplus in aircrafts in the United States after World War II, the country was able to acquire the DC-3 and DC-4 aircrafts at exceptionally low prices, which had helped to kick start their aviation industry. The supporting facilities and airfields that were developed during the war, were used in increasing the aviation growth.  For tourists, the obvious choice in transportation due to the lack of adequate surface systems was air transportation.

Since the initial steps in the aviation inception, the industry has experienced rapid growth. Additionally in 2007, the Saudi Arabian Government ended the Saudi Arabian Airlines monopoly, which has caused the industry to expand as well as evolve. According to CAPA, “the country has the largest domestic market in the Middle East, with a population of 29 million people spread over 2.1 million sq. km, but has not been able to replicate the rapid growth its GCC neighbors have enjoyed because of regulatory impediments.” (CAPA, 2014) New airlines have since been entering into the Saudi Arabian market, and according to sources within the next few years, there will be a launch of a couple new airlines that provide both domestic and international flights. These carriers will help to create an environment that it’s competitive, and provides options for both the Saudi Government, and Saudi Arabian travelers, in helping to realize the country’s development requirement and policy goals.

Currently within the market, the country will have Qatar Airways, Al Maha Airways, SaudiGulf Airlines, and Gulf Air.  The aircrafts that many of the carriers utilize for domestic, regional, and international flights include, A320s (airbus), narrowbody and widebody aircrafts, and CS3000s (narrowbody). With these new additions, it is posed to help with the expansion of routes covered, as well as opening up for foreign workers and pilgrimage traffic markets. While these new entrants to the market are anticipated, Saudia (Saudi Arabian Airlines) market position and power is still dominate, particularly in the domestic routes within the Saudi market.

While the ending the monopoly, there have been incomplete elements to the industry. This including the lack of raise domestic fare cap, and the hefty subsidies that were not relinquished for Saudia’s public and fuel service obligation routes. “The GACA did not possess the legislative clout it needed to give the new entrant carriers the regulatory freedom they needed if they were to succeed.” (CAPA) As a result from this, the new entrants to the airline market for Saudi Arabia, were forced in operating loss making domestic routes. Many of the new entrants have also collapsed under the weight of the heavy losses, and preventing price flexibility for the corporations. With the demand for domestic routes rather than local routes, has placed pressure for new entrants in order to serve these demands. Saudi travelers have complained over the poor services in the smaller airports, and increasing more demands for flights. Even with billions being invested into the airport infrastructure’s transformation, the industry is looking for a viable solution. With the urging of the Association for Consumer Protection, the Saudi Government is being urged to open the local market to new entrants. The feasibility for turboprop aircraft, can add to the interesting mix of bids that want to enter into the market including groups from Gulf Air, HNA Group, Nesma Holding, Islamic Development Bank, Falcon Express, Bahrain Air, and Qatar Airways. Even with the entrant of two new carriers, there are also urgings for more privatization in the country.

Turboprop Feasibility

For the Saudi Arabia aviation industry, there is still much to do before the introduction of a more efficient aircraft in meeting the traveler demands. According to the Giovanni Bisignani,

“Airlines are safer, greener, and leaner after a decade of change. But profitability is still pathetic. No single action will be a panacea for four decades of 0.1% net profitability. But a level playing field and normal commercial freedoms are most certainly the foundation stones of a sustainable future.” (IATA 7)

According to Arab News, “Dubai Aerospace Enterprise (DAE) is to spend up to $1 billion on new turboprop planes, the aircraft leasing company said, betting on growth in Asia’s crowded regional and domestic markets.” (Reuters)  As the country has emerged from the recent debt crisis, they have decided to turn to the turboprops to be used in carrying fewer than 100 passengers for short-haul trips. While much demand has been placed on domestic and international travel, Saudi Arabia is believing by turning to these turboprop commercial aircrafts that it will diversify the portfolio, and meet the increased demand for regional air connectivity. According to the Global Market Forecast, sees UAE in the sixth position for passenger demand, in which can value the market at over $177 billion. (Global Market Forecast 14) The demand for air travel will continue to increase as the population rapidly increases. “As globalization blurs national borders and intensifies competition, cities from the developing world, such as shanghai, Beijing, Seoul, Mumbai, Delhi, Dubai are also quickly becoming economic giants, in turn attracting a high number of air traffic passengers.” (Global Market Forecast 20) In addition, the emergence of global companies and global cities will increase the connectivity and demand between cities, which will drive the development and shape of the air transport in the future. For the long-haul market, there is potential emerging growth from the Americas, to Africa, and the Middle East, as well as Europe and South America.

The market for turboprop aircrafts, as well as other aircrafts are in great demand, as many of the emerging countries have recovered from their debt economies, or other issues that impacted their economy. The demand from travelers internationally is posed to increase significantly within the next few decades, as even now in Saudi Arabia, the supply has yet to meet the demand. The government, has loosen their reins on many of those that are able to enter into the market, however, with more bids placed, and many of them being accepted, there is hope that the new entrants will help to provide solution to the market. Saudia, is still the dominate airline within the country, so integrating turboprop aircrafts into their domestic operations will only increase their market position.

With many of the flights in demand for domestic and international flights, operating more aircrafts that deliver to domestic flights would benefit the market. The problem however is that the turboprop aircrafts are small, and would only allow for fewer than 100 passengers. With millions of residents, and even more millions that travel in and out of the country, turboprop aircrafts would only be feasible for a select few. Those that are willing to pay for the extra convenience of smaller and faster flights would benefit from the aircraft. In being more economical and sustainable, it would not be feasible for a larger passenger class.

Works Cited

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IATA Annual Report. IATA. 2011. Web. 18 March 2015. http://www.iata.org/pressroom/documents/annual-report-2011.pdf

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