New Horizons

Saudi’s National Air Services was one of the stars of Dubai 2003, signing deals with Gulfstream and Raytheon. The company is also set to order up to four narrowbody aircraft and it is also looking at launching a airline to serve the internal Saudi market.

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By  Neil Denslow Published  January 4, 2004

|~|nas_m.jpg|~|Mohammed Al Zeer, president & CEO of NAS|~|Saudi Arabia’s National Air Services (NAS) has quickly grown into the largest private aviation company in the Middle East. It was set up four years ago with two aircraft, but following its two latest orders, which were signed at the Dubai air show, its mixed fleet will hit 28 planes by the end of the year. The company is also looking to push into new markets with the launch of a charter service using larger aircraft and possible plans to launch a low-cost carrier inside the Kingdom. Over the last four years, NAS has expanded its business by offering a mix of different services to its customers. The company offers traditional chartering and aircraft management services, and it is also the regional partner for fractional ownership company NetJets. NAS also promotes a hybrid solution that combines different elements of these various ownership options. The success of this range of products has enabled the company to rapidly grow its mixed fleet over a short period of time. Last year, the company fleet additions included a Gulfstream IV-SP and a Dassault Falcon 2000, before it signed two big orders at the Dubai air show. Firstly, it agreed to purchase two new Raytheon Hawker 800XPs with Honeywell engines in a US $25 million deal and then it signed up for three new Rolls-Royce powered Gulfstream G300s worth $75 million. Further purchases are set to follow this year. NAS already plans to add two narrowbodies to its fleet to support its recently launched Al-Khayala chartering service, and two more are likely to join these in the near future. More G300s business jets are also expected to be added to the fleet. “We do believe that… over the next 12 months or so, we will be coming back [to Gulfstream] for another three or four aircraft depending on the market requirements,” says Mohammed Al Zeer, president & CEO of NAS. Gulfstream has been a key partner for NAS since it started operations in 1999. The aircraft maker installed a supply of spare parts in Jeddah, along with technical personnel, and it also provided NAS with its first two jets. The speed with which these were delivered was a critical factor in the early development of the company. “If we had waited for aircraft to be manufactured and delivered to us, we would have waited at least 12 months to start making money,” says Al Zeer. “However, within less than three months of signing the contract, Gulfstream put two aircraft that it owned with us in order to enable us to launch the company.” “To me, these three elements — the core fleet, the spare parts and the technical support — have been extremely important in getting us started and to us continuing to provide the best support for our customers. And, for me as a customer, I can’t ask for more,” he adds. NAS has been able to grow its fleet and business by extending its customer base beyond traditional markets in the region, such as government agencies and high net worth individuals. The company is still active in these markets — the Saudi Ministry of Finance is its largest customer — but it has also been able to help expand the market for business jets in the region. “It was a very well defined and traditional market, where we served governments who ordered a few aeroplanes, wealthy individuals and so on, but from our perspective, that market seemed to have plateaued,” comments Bryan Moss, president of Gulfstream. “What got us excited about NAS was that they seemed to have the vision to go to the next level here in terms of the number of aeroplanes that would be usable in the marketplace.” Key to expanding the market in the region has been NAS’s introduction of NetJets. This is a fractional ownership programme that allows users to purchase shares in the NetJets fleet on a timeshare basis. NetJets and its partners manage the aircraft and customers are then able to use any NetJets aircraft for a certain number of hours per year depending on the amount of shares they have bought. “The moment you become a NetJets owner, whether this is a NetJets Middle East owner, a NetJets Europe owner or a NetJets US owner; you are a NetJets owner,” says Al Zeer. “This means you are guaranteed service, whether you are in the Middle East, Europe or the United States, which gives a tremendous advantage to businesspeople.” The fractional ownership concept is beginning to catch on in the region, although NAS is still trying to raise market awareness. It has so far signed up nearly 60 owners across the Middle East, many of whom have increased their ownership quota after trying out the service. “Almost 60% of our clients buy or lease an additional [NetJets] share within the first nine months of their ownership,” says Al Zeer. “We have found that trips that owners used to avoid — either because of airline schedules or the non-availability of their own private jet — they will do on a NetJets flight just because of the ease of the service, the availability of the equipment, the efficiency and the cost,” he continues.||**||Contract conditions|~||~||~|Alongside NetJets and its traditional business jet charter and aircraft management services, NAS is also looking to move into new markets. The first of these to be launched is Al-Khayala, which is billed as a seven-star charter service. This will be an all-encompassing luxury travel solution for larger groups of people offering both transportation to and from the airport, and hotel accommodation, if needed, as well as the air services. The company will be using narrowbody aircraft for Al-Khayala, either Boeing Business Jets (BBJs) or Airbus A319/320s, as it will be aimed at corporates or large families who move around in groups of 25-30 people. “We have found that there is a very unique segment of the market in the Middle East, where first class service is just not good enough for them, but any solution using a private airplane… is too small for them,” explains Al Zeer. This need for extra seats explains why NAS will use larger aircraft on these routes. “Up until now the largest cabin size we have had is a Gulfstream, and usually the maximum capacity is 13 with six or seven [people] on an average flight. Since we are going to be catering to [larger] groups of passengers… we have decided that we need a bigger cabin,” he adds. The company will lease two nearly-new aircraft for the service and it expects to decide between Boeing and Airbus by the middle of the month. However, even though NAS is the largest operator of BBJs in the region, the American company is not a shoo-in. “We cannot [ignore] the encouraging feedback we have received from Airbus, whose A319/320 family represents an interesting option,” notes Al Zeer. The key factor in the company’s decision will be the contractual conditions surrounding the lease, as well as the support on offer. “The support package is more important to us than the cost of the deal itself,” says Al Zeer. “It doesn’t make sense to save a few bucks upfront and then not have the right support package,” he adds. At the other end of the market, NAS is also looking to benefit from the Saudi government’s decision to open up its internal skies to competition. With Saudi Arabian Airlines’ domestic monopoly ended, NAS is examining the possibility of creating a low-cost carrier to serve routes in the Kingdom. “We are assessing the whole business opportunity, and that entails assessing the routes, assessing the load factors, passenger behaviour and movements, assessing the regulatory environment, assessing what opening the market entails, and assessing what is the right equipment,” says Al Zeer. The company is yet to decide whether it will go ahead with the LCC plan, but Al Zeer is sure that there is a market for more airlines to serve the domestic Saudi market. “The population is growing at a very high rate, and the average Saudi is getting more and more sophisticated in his tastes, and this creates a need for other companies to provide commercial air transportation services,” he says. “The traditional religious tourism… [also] has huge potential, and this has opened up a lot in the last few years. However, it is very difficult to make all of these ideas work unless you have the infrastructure, and part of the infrastructure is companies that provide safe, efficient and cost effective air transportation,” he adds. Al Zeer is also confident that the Saudi government will eventually extend its ‘open skies’ policies onto international routes, which would further the opportunities available to NAS’s proposed LCC. However, when this will happen is impossible to guess. “I couldn’t even begin to predict that, but I think it is just a matter of time,” says Al Zeer. “Deregulation took place in America in the 1970s, and it took more that 20 years to get to Europe. If it takes another six or seven to get to the Middle East, then that’s not bad,” he adds.||**||

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