U.S. Contributes to Saudi Aviation a 2030 Priority
Saudi Arabia is emerging as a key aviation transportation hub in the Middle East. A wealth of business opportunities is available for companies across the aviation industry ranging from aviation-related equipment, technology and services to aerospace materials.
The Kingdom’s aviation sector accounted for 4.6 percent of total GDP in 2018, contributing $34 billion in gross value added. Transportation and infrastructure has received a significant portion of Saudi Arabia’s budget over the years. Spending in those two sectors has increased by 50 percent over the past two years. Saudi Arabia boasts a network of 27 airports, 10 of which are international, and handled over 99 million passengers on over 771 thousand flights in 2018. Since 2017, over $16.7 billion was allocated for aviation projects to underscore the importance of the aviation sector in driving economic growth and diversification.
Saudi aviation has diversified in the past 10 years, due in part to enhanced regulatory developments that enabled several low budget air carriers, like Flynas and Flyadeal, to operate domestically. The addition of these airlines will play a prominent role in allowing Saudi Arabia to attain several of its Vision 2030 goals such as increased Saudi employment participation (1.2 million jobs for Saudi is expected), substantial increase in tourist visits (1.5 million by 2020), and increase the revenue generated from tourism to 18 percent by 2030.
Saudi Arabia also has a large market for aerospace materials and U.S. companies remain a preferred vendor due to quality of their products. The Council estimates that Saudi Arabia spent $1.7 billion on U.S. aircraft, spacecraft and parts. Moreover, U.S. aircraft and spacecraft sales to the Middle East region has remained above $11 billion over the past 5 years, with 83% consisting of civilian aircrafts, engines, and parts in 2018. Localization of Defense manufacturing and assembly in Saudi Arabia is a priority for the government, giving U.S. firms numerous opportunities to partner with local companies by setting up joint ventures and knowledge sharing.
Investment Opportunities in Saudi Arabia
Investment opportunities abound for both Saudi and foreign companies, especially American companies. The market is open for partnerships and investment. New policies created by the initiatives outlined in Vision 2030 encourage increased Foreign Direct Investment. U.S. companies have expressed continued strong interest in the Saudi market and look to be active participants in the localization goals outlined in Vision 2030.
Changes implemented by the Saudi Arabian General Investment Authority and General Authority of Civil Aviation (GACA) have made it easier for private firms to partner with the Saudi Arabian government as it works to build key industries like aviation. Whether through infrastructure projects, training programs or manufacturing, U.S. companies have many ways to expand in Saudi Arabia. Given the development of new Public-Private Partnership regulations, companies can provide their expertise and gain important investment opportunities as GACA works to expand its airports to serve its growing population and over 8 million pilgrims, while maintaining a globally recognized standard of safety.
Through the General Directorate for Privatization, the Saudi Civil Aviation Holding Company, and Riyadh Airports Company our member companies have been able to bid, execute, and complete contracts. Member companies like Jensen Hughes developed a comprehensive fire protection plan and smoke control system for the King Abdulaziz International Airport’s terminal buildings and atriums in 2014. Skidmore Owings and Merrill also assisted with the designing and structural engineering of the Hajj Terminal at King Abdulaziz International Airport. These companies have been able to contribute to the expansion of Saudi Arabia’s aviation sector.
Saudi Arabia has the largest market for aircraft parts in the Middle East. Exports of U.S. aerospace materials to Saudi Arabia averaged $1.8 billion annually between 2010-2015. This makes it a natural location to serve as a manufacturing hub for aircraft parts and aerospace structures for U.S. companies. Given the plans outlined in the National Industrial Development and Logistics Program (NIDLP), we believe there will be an increase in U.S. companies interested in entering and expanding in the market. This is where the work of the Council will become important as we work to match our U.S. and Saudi Arabian members with strategic partners.
Another example of a Council member company becoming a strategic partner occurred in 2009 when Wamar International created a joint venture with the Middle East Propulsion Company to attract foreign investment with companies like Saudi Arabian Airlines and Al Mohawarean. This partnership yielded high returns on investment with ongoing Maintenance, Repair and Overhaul service contracts at the King Khaled International Airport Industrial Area and the Royal Saudi Airforce.
Creating opportunities for U.S. and Saudi Arabian businesses to build trade relations is the mission of the Council and through our efforts we can deliver sustainable partnerships. For example, in February of this year our member, Boeing, signed a Memorandum of Understanding with NIDLP, the Saudi Arabian Industrial Investments Company and the Saudi Arabian Mining Company to promote and support the aviation industry in Saudi Arabia.
These are just a few examples of what can be accomplished when U.S. and Saudi Arabian business relationships are expanded.
Our Chief Executive Officer Edward Burton spoke at the Global Aviation Summit held in Riyadh April 1-2. If you are interested in learning more about aviation in Saudi Arabia please contact our Business Strategy Advisor Will Brodt firstname.lastname@example.org.