Overview - Nas Air

nas air – Saudi Arabia’s first LCC

National Air Service-owned LCC, nas air, is one of the two first LCCs licensed to operate in the Kingdom’s domestic air transport sector. With its 25-Feb-07 inaugural flight to Jeddah, nas became the Kingdom’s first-ever low cost airline. It is based in the national capital Riyadh, the Kingdom’s largest city, with 4.3 million residents.

The carrier is being operated as a separate business unit of established VIP air transport concern National Air Service, the local franchisee of NetJets. It initially operated three A320 aircraft on the vital Riyadh-Jeddah route, where its three daily frequencies put it in direct competition with flag carrier Saudi Arabian Airlines, which operates 16 daily services in the market, including 14 with widebody aircraft.

nas has since expanded its scale to five aircraft and the same number of destinations, having added services to Madina, Jizan and Rafha in Apr-07. To support further expansion, nas intends to have eight A320s in operation before the end of 2007.

Like fellow Saudi LCC Sama (see below), it will face obstacles in implementing a low cost business model Not least is the country’s restrictive pricing regulations, including a fare cap, which in a non-monopolistic setting will actually serve to harm both the LCCs and the full-service incumbent.

Moreover, the consumer economy bears little resemblance to that which has fostered LCC growth elsewhere, suffering from low internet penetration rates and a lack of experience with and acceptance of non-cash payment and electronic-ticket methods. (The Saudi telecommunications system has suffered the same monopoly state enterprise dominance as in the aviation sector.)

Reliance on travel agents consequently remains high, hiking distribution costs. Lack of internet penetration could stunt the LCCs’ outreach (although nas received over 2,500 reservations within 24 hours of activating its online booking service)

The carrier, which CEO Peter Griffiths calls “a no-nonsense airline embodying the true Saudi spirit”, will also have to content itself with domestic markets until 2009.

Even so, it sees potential for profitable service to 23 destinations within the Kingdom, and will concentrate on building its domestic portfolio before branching out to the greater Middle East.

Seeing the fundamentals of the giant, underserved country, with its young population, rapidly escalating per capita GDP and rates of personal consumption, the carrier is looking to a big future.

NAS has signaled its intention to conduct an IPO by as early as 2008 in order to fund expansion to meet the market’s demand.

It envisages spending as much as USD2 billion to acquire 75 aircraft, growing to a fleet of 100 by 2010. (That figure includes acquisitions for its VIP operation as well; the company has not delineated how many would go to each operation.)

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