Treble chance - NAS Air has three selling points for survival

Budget airlines have come only recently to the Arabian Gulf but the marketplace is rapidly filling up. Air Arabia , Jazeera Airways, flydubai and Sama are among those fighting it out for market share in the region.

Whether all survive remains to be seen. A year ago, however, it seemed likely that one early casualty would be nas air. The first Saudi budget carrier’s future seemed doubtful after a poor start following its February 2007 launch.

Fleet utilisation was low, load factors were worse. And astonishingly, the airline published schedules only a month in advance, making it difficult for passengers to book ahead.

Things began to change after a new top management team came on board last autumn; statistics have started to move in the right direction, aggressive expansion plans have been drawn up and passenger feedback has improved markedly since spring 2009.

While there is still work to do, there is a new optimism at the Riyadh-based airline.

A senior member of the new management team, chief commercial officer Dr Maria-Angelika Hanne, puts many of the problems of the past down to many of her predecessors coming from legacy or state-owned carriers that did not face the same pressure to be profitable as budget airlines.

An indication of the problems facing nas air before the owners changed the management team comes from the fact that fleet utilisation was just 6.2 hours daily, services between city pairs operated at different times from day to day and, in 2008, it flew just 500,000 passengers.

Today, utilisation is over nine hours (with 11 hours targeted for next year), schedules are not only published for a year ahead but have been expanded to give more frequent (often daily) services between city pairs and Hanne anticipates carrying 1.4 million passengers in 2009.

The airline has three main selling points, she explains: a brand-new fleet (its eight Airbus A320s and four Embraer 190s have an average age of just 10 months); on-time performance; and low prices.

She makes the point that nas air is not a ‘full-on’ low-cost carrier (LCC) like Southwest or Ryanair. Rather, it sits somewhere between the LCC model and full-service airlines.

She prefers to describe the airline as a ‘budget carrier’ that has some LCC attributes, such as one-class seating, while avoiding many of the charges now commonly imposed by LCCs for services such as carrying baggage in the hold or priority boarding. The only additional charge made by nas air is for food and drink served on board.

Indeed, the airline operates an unusually generous baggage policy, with international passengers allowed to check in 30kg. This is to take account of local travellers’ habits – particularly for those departing from Jeddah following the Haj or Omra pilgrimages, who tend to carry a lot of gifts for family and friends.

Another difference with LCCs is that while the Saudi carrier accepts it is a point-to-point airline, passengers buying two tickets can connect through its network of routes.

That network has been extensively strengthened in the past year. Most destinations now have daily or double-daily services. The airline’s busiest sector, Riyadh – Jeddah, has four daily return flights.

The network has also been expanded with new domestic and international destinations. Seven new points have been added this year so far – Dammam, Damascus , Latakia, Assiut, Sharm-el-Sheikh, Sana’a and Kuwait .

The next new destination will be Khartoum at the end of this year or the start of 2010, followed by flights to as yet undisclosed destinations in India and Pakistan . Other Middle East destinations are also pencilled in, with the airline looking at Iran and Iraq in the longer term.

“We’re growing aggressively,” said Hanne. “We’re also turning round our image and the perceptions of our customers. We’re getting a lot of very positive comments – they weren’t so good six months ago.” Load factors are also increasing and are now around the 66% mark, with routes to the airline’s three Egyptian destinations – Assiut, Sharm-el-Sheikh and Alexandria – among its busiest. Beirut and Damascus are also popular.

Among the domestic sectors flown are several Public Service Obligation routes (PSOs) that the Saudi government transferred from flag-carrier Saudi Arabian Airlines in October 2007.

These are not subsidised by the government but, in operating them, nas air at least now has access to the same preferential fuel rates granted to the national carrier for domestic routes. Discussions are continuing for government financial support for the PSOs.

Initial plans for nas air were that the fleet would grow to 18 aircraft by the end of 2010. A new strategic plan for the period out to 2014 was due to be finalised as Arabian Aerospace was going to press and this figure may change, said Hanne, but she described the figure of 18 aircraft as “still realistic”. Similarly, the airline’s initial projection of carrying its 10 millionth passenger by the end of 2010 is still feasible, she believed.

Expansion will require more pilots and cabin crews. Like many airlines in the region, nas air draws its personnel from many nations. “The Saudi Arabian government would like to encourage Saudi nationals to join the workforce and we’re very eager to get nationals who fulfil our requirements.

“We have a lot of Saudi pilots, while our cabin crews come from several Arabic-speaking countries such as Egypt and Tunisia .” Staff from nations as far afield as Brazil , India and Bulgaria are also employed. The Kingdom’s social conservatism means Saudi women are not employed in these roles, but Saudi men have been joining the ranks of the cabin crew.

Social attitudes in The Kingdom change slowly, but the younger generation are more willing to take on roles that previous generations might have dismissed, she explained. “We have some very good young Saudis who are quite promising. Especially in ground operations, we have a lot of Saudis and I think their attitude in general has become more ‘international’.”

Differences in culture mean that “you can’t apply 100% European or US management methods, because the ways of communication are different. They’re not quite so direct and everything is handled on a more personal level. You need to discuss issues from several points of view and several times. Communication is a challenge and a very important task here.”

Hanne accepts, however, that just as the new management team have had a steep learning curve to turn the airline around, existing staff have also had to cope with changes. It is still relatively unusual to find a senior female manager in an Arab airline: “The learning curve has also been on their side, but I think everyone has adapted very well to having me as a boss!”

Hanne’s background makes her well-suited to be a member of the team trying to restore nas air’s fortunes. She served with Lufthansa for 17 years in planning, finance and product development, becoming responsible for planning for North and South America and overseeing the German carrier’s entry into the Star Alliance.

She then helped restructure Indonesian carrier Garuda and was deputy CEO of Air Gabon as it returned to profitability, although the latter airline has now ceased operations. She has also had spells with Lufthansa Consulting and her own management consultancy firm.

“I have done a lot of company turn-rounds and interim management contracts, so I am used to companies in very dynamic change situations.”

With several budget airlines now fighting for a share of the regional marketplace, will there be enough business for all to survive? That, said Hanne, is something that only time will tell. However, the prospects for nas air being among the survivors are considerably better than they were a year ago.