Saudi Arabia - Civil Aerospace: Liberalization and increasing demand to drive expenditure (Strategy, Performance and Risk Analysis)
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Saudi Arabia, an oil-based economy, is one of the largest economies in the Middle East. Oil accounts for 42.0% of the country’s GDP. Its nominal GDP decreased from US$650.0 billion in 2015 to US$639.7 billion in 2016 due to a decline in oil prices. However, it is expected to reach US$814.6 billion in 2021, driven by increased investments in the private sector to offset its dependence on oil. Saudi Arabia’s civil aviation regulator, General Authority of Civil Aviation (GACA), controls the civil aviation industry in the country. The government has undertaken several initiatives to make the country’s business environment conducive to investments; “Saudi Vision 2030”, which was launched in April 2016, is aimed at increasing foreign investment and enhancing overall competitiveness.
Rise in the number of air passengers
As a result of increasing demand on international routes, the number of air passengers in Saudi Arabia increased at a rate of 5.3%, from 32.8 million in 2015 to 34.6 million in 2016, and is forecast to increase at a CAGR of 5.6%, from 37.5 million in 2017 to 46.6 million by 2021.
Aircraft deliveries and billing are expected to increase
In Saudi Arabia, the number of aircraft deliveries increased from eight in 2015 to 21 in 2016, and is forecast to increase at a CAGR of 10.0%, from 15 in 2017 to 22 in 2021. This is primarily due to the expected procurement of wide-body aircraft by airline operators, such as Saudi Arabian Airlines, in order to commence operations on new long haul routes. It is also expected to lead to a subsequent increase in billing. Billing against deliveries in Saudi Arabia increased from US$673.2 million in 2015 to US$1,644.2 million in 2016, and is forecast to increase at a CAGR of 10.0%, from US$1,178.4 million in 2017 to US$1,730.6 million in 2021
Rise in aircraft capital expenditure
Growth in the number of air passengers is driving aircraft deliveries as airline operators look to procure more aircraft in order to satisfy high passenger demand and launch new services to attract more customers. Similarly, due to the rise in the number of deliveries, CAPEX on aircraft has also risen. Aircraft capital expenditure stood at US$440.0 million in 2016 and is forecast to increase at a CAGR of 5.9%, from US$545.0 million in 2017 to US$685.0 million in 2021.
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