Saudia Group: the latest example of a successful dual brand strategy: Two CAPA Awards and four CAPA TV videos

In 2016, Saudia joined a growing group of major flag carriers to adopt a dual brand as part of an ambitious transformation programme. The strategy has already succeeded at driving faster growth and market share gains. The group’s share of domestic seat capacity increased from 70% in 2017 to 75% in 2018 while its share of international seat capacity has increased from 33% to 37% (based on full year schedule data from OAG).


Summary:

  • Saudia embarked on a transformation programme in 2016 that has succeeded at improving the airline’s long-term position;
  • A dual brand model is part of the transformation, resulting in the 2017 launch of flyadeal;
  • Saudia won CAPA’s Asia Pacific Airline Turnaround of the Year Award while flyadeal won the Asia Pacific Start-Up Airline of the Year Award.

Saudia and flyadeal were both recognised at the Nov-2018 CAPA Asia Pacific Aviation Awards of Excellence. Saudia received the Airline Turnaround of the Year Award while flyadeal, which commenced operations in Sep-2017, received the Startup of the Year Award.

CAPA cited Saudia’s new dual brand strategy in selecting the group for the turnaround award along with product improvements, fleet renewal and international expansion. Saudia CEO Jaan Albrechet and flyadeal CEO Con Korfiatis represented the two airlines at the awards dinner and provided detailed updates in exclusive CAPA TV interviews.

Mr Albrecht highlighted the four pillars to Saudia’s transformation programme: opening a new terminal Jeddah, growing religious pilgrimage traffic, improving its product and reducing costs. “It has been a big, big transformation and a successful transformation process. We are focusing now on the big opportunities that we have, focusing on product improvement and focusing on the benefit of having a new hub in our new terminal in Jeddah,” he explained.

Mr Albrecht added: “I have used the term sleeping giant. Saudia is the 30th biggest airline in the world. We have so much potential but it has been neglected over the years for several reasons. Now with a focused approach we are seeing quite a success in putting Saudia to where it belongs.”

VIDEO: Saudia CEO Jaan Albrecht discusses how a new terminal at Jeddah, growth in religious traffic, product improvements and a 27% decrease in ex-fuel CASK is transforming the “sleeping giant”

Mr Korfiatis told CAPA TV that flyadeal has succeeded at stimulating domestic demand and catering to a different segment of the market. Almost three quarters of flyadeal’s passengers are 20 to 40 years old. Mr Korfiatis said flyadeal’s demographic is much different than Saudia’s on the same routes, which has always been the intent.

flyadeal has so far focused entirely on the domestic market and is planning a further 35% increase in domestic seat capacity in early 2019 as it places into service three additional A320s. “Saudi Arabia has the largest domestic market in the Middle East,” said Mr Korfiatis. “We need to have a solid offering and a solid network in our home market before we stretch ourselves and get offshore.”

VIDEO: flyadeal CEO Con Korfiatis discusses the LCC’s plans for opening a Riyadh base and pursuing further domestic expansion using three newly delivered A320s

While it is still early days and a lack of financial disclosure markes it impossible to make a full assessment, it appears Saudia’s dual brand strategy is working, following the strategies successfully used at major flag carriers in other regions. Saudia Arabia is a unique market requiring significant adaptation to local market conditions at both brands. However, the basic model is the same and the successful dual brand strategy at Saudia could become an example of Saudi Arabia’s overall transformation.

Saudia’s transformation progarmme, including the launch of an LCC subsidiary, support Saudi Arabia’s Vision 2030 programme, which is aimed at modernising the country and diversifying the economy away from oil. Tourism and aviation are important components.

In accepting Saudia’s award at the gala dinner, Mr Albrecht said: “What we are doing in Saudi Arabia is modernising the country. The airline plays an important role in this, standing on our own feet with domestic competition. It is challenging and fascinating really to live in the country and be part of this process.”

Mr Korfiatis followed Mr Albrecht on stage to accept flyadeal’s award. “Jaan was absolutely right. If you ever have any interest in your life in Saudi Arabia now is the time.”

He credited the flyadeal team and said the airline’s decision to follow a pure LCC model has helped drive its initial success. “Low cost airlines in the Middle East – generally and not just Saudi Arabia – have been non-existent.  Whatever apparent low-cost segment has been there over the years has been very much the hybrid model.

“No one has launched with a true low-cost airline approach and benchmarking that to the best low-cost brands that have been around for as long as 40 years. That has really been our focus operationally in setting it up and it has played to a demographic that has been thirsty for this kind of product in the market.”

VIDEO: flyadeal awarded CAPA Asia Pacific Start-up of the Year Award

Mr Albrecht credited the Saudia team and pointed out when he joined the airline in early 2017 the transformation project had already begun. “I just witnessed a lot of work in progress, a lot of good ideas and a lot of good things that were happening. We jumped on board and we continued to invest. It’s a really credit to the employees of Saudia.”

VIDEO: Saudia awarded the CAPA Asia Pacific Airline Turnaround of the Year Award