NEW DELHI/SINGAPORE: Indian airlines are turning to the international market in search of better returns as the intensifying fight for a bigger share of the world’s fastest growing domestic market — where price is king — drives down profits.
While global airlines’ profits have been strong since 2015 — though with wide regional variations — Indian carriers are struggling to remain profitable, despite filling nearly 90 percent of their seats and benefiting from a more than doubling of domestic passenger numbers over the last four years.
“It is an incredibly tough domestic market, very price sensitive,” said Stephen Barnes, chief financial officer of Singapore Airlines, which operates an Indian carrier, Vistara, in a joint venture with the Tata Group.
“Commanding a premium for a premium product is hard to do. From our perspective we invested in order to see the business grow internationally. If you look at the results of Indian airlines their performance is better internationally.”
Promotions such as $50 one-way tickets on the two-hour flight from Mumbai to Delhi are easy to find and, with airlines expected to take delivery of more than 500 aircraft over the next five years, pressure on fares and profits is increasing.
India is one of the cheapest domestic airline markets in the world, with an average fare of 13 cents per kilometer flown, according to data from travel firm Rome2Rio, less than half the 27 cents per km average in China and the United States.
Airlines including Vistara, SpiceJet Ltd. and InterGlobe Aviation Ltd’s IndiGo are in talks to buy or lease widebody aircraft as they firm up international growth plans to boost profitability.
There is huge potential for international travel from India, where the domestic aviation market has grown about 20 percent annually in recent years.
Only 0.3 percent of the 1.3 billion population currently travel abroad for a holiday every year, a fraction of the estimated 100 million Indians who could potentially afford to do so, according to an analysis of household income by aviation consultancy, CAPA.
The international market is dominated by foreign carriers but the market share of Indian airlines including Air India and Jet Airways has been climbing, helped by policies that limit access by foreign carriers, and reached about 38 percent in 2017, up from 31 percent a decade earlier.
Foreign airlines such as Emirates and Hong Kong’s Cathay Pacific Airways have reached the limit of flights into India allowed under bilateral agreements and New Delhi has not extended additional rights, creating an opening for domestic carriers to grow, said Binit Somaia, director for South Asia at CAPA.
“Demand is there, income levels are rising and people want to travel internationally,” he said.
Jet Airways is considering launching new flights from Mumbai to Sydney, two sources with knowledge of the matter said, while Vistara is planning to order six Boeing Co. 787 aircraft and will expand its narrowbody fleet of Airbus A320neos as it starts international flights, sources have said.
A Jet Airways spokesman said the airline “continuously reviews its fleet and network plan ... to realize greater synergy with its business strategy.”
In the domestic market, which provides crucial connections for international flights, airlines have been jockeying for position at a time when one-time leader Air India has been losing market share to rivals with far lower costs, such as IndiGo.
The Indian government last month failed to attract a single bidder by the deadline for its 76 percent stake sale in the loss-making national carrier.
Revenue per available seat kilometer, a measure combining airfares and seats filled, has been falling at Indian airlines due to stiff competition at a time when the oil price has risen nearly 50 percent in the last year.
IndiGo last month reported a steep fall in quarterly profit due to higher fuel prices and continued pressure on yields, a proxy for airfares.
IndiGo has lifted the proportion of its capacity dedicated to international flights to 15 percent, from 11 percent, in the last year and is seeking regulatory approvals needed to operate long-haul flights, Rahul Bhatia, the company’s chairman, said during an analyst call.
SpiceJet is the only listed Indian airline to post a profit for the last 13 quarters consecutively.
Analysts say it has achieved this by maximizing its aircraft utilization and also flying less competitive routes where it can have a better control over fares, helping protect yields.
Even so, it plans to expand its international flights as it starts taking delivery of its Boeing 737 MAX aircraft from August. The planes, which have a range of six hours and can reach destinations such as Singapore, Hong Kong and Bangkok, will mainly be deployed on international routes.
Infrastructure constraints at major Indian airports like Mumbai and Delhi, where daytime slots are hard to get, also make going international a better option as airlines can utilize night-time slots, a SpiceJet official said.
“International is the only way out,” the official said.
India airlines spread their wings to escape airfare war at home
India airlines spread their wings to escape airfare war at home
- India is one of the cheapest domestic airline markets in the world, with an average fare of 13 cents per kilometer flown
- The Indian government last month failed to attract a single bidder by the deadline for its 76 percent stake sale in the loss-making national carrier Air India
Lucid beats estimates for EV deliveries as price cuts, cheaper financing spur demand
- Company handed over 3,099 vehicles in the fourth quarter ended Dec. 31
- For 2024, production rose 7% to 9,029 vehicles, topping Lucid’s target of 9,000 vehicles
LONDON: Lucid Group beat expectations for quarterly deliveries on Monday, as the Saudi Arabia-backed maker of luxury electric vehicles lowered prices and offered cheaper financing to drive demand, sending its shares up more than 6 percent.
The company handed over 3,099 vehicles in the fourth quarter ended Dec. 31, compared with estimates of 2,637, according to six analysts polled by Visible Alpha. That represented growth of 11 percent over the third quarter and 78 percent higher than the fourth quarter a year earlier.
Production rose about 42 percent to 3,386 vehicles in the reported quarter from a year earlier, surpassing estimates of 2,904 units.
For 2024, production rose 7 percent to 9,029 vehicles, topping the company’s target of 9,000 vehicles. Annual deliveries grew 71 percent to 10,241 vehicles.
Lucid, backed by Saudi Arabia’s sovereign wealth fund, started taking orders for its Gravity SUV in November, in a bid to enter the lucrative SUV sector and take some market share from Rivian and Tesla.
Rivian on Friday topped analysts’ estimates for quarterly deliveries and said its production was no longer constrained by a component shortage. But Tesla reported its first fall in yearly deliveries, in part due to the company’s aging lineup.
Demand for EVs, already squeezed by competition from hybrid vehicles, could face another challenge as President-elect Donald Trump is expected to reverse many of the Biden administration’s EV-friendly policies and incentives.
The company also raised $1.75 billion in October through a stock sale that CEO Peter Rawlinson believes will provide Lucid with a “cash runway well into 2026.”
Lucid, whose stock was down about 28 percent in 2024, is scheduled to report its fourth-quarter results on Feb. 25.
Saudi Arabia’s PIF completes $7bn inaugural murabaha credit facility
- Shariah-compliant financing is backed by a syndicate of 20 international and regional financial institutions
- Facility builds on PIF’s recent success with sukuk issuances over the past two years
RIYADH: The Saudi Public Investment Fund has closed its first Murabaha credit facility, securing $7 billion in funding. This is a key step in the fund's plan to raise capital over the next several years.
The Shariah-compliant financing is backed by a syndicate of 20 international and regional financial institutions, according to a press release.
A murabaha credit facility is a financing structure compliant with Islamic principles, where the lender purchases an asset and sells it to the borrower at an agreed profit margin, allowing repayment in installments. This structure avoids interest, adhering to Shariah laws.
“This inaugural murabaha credit facility demonstrates the flexibility and depth of PIF’s financing strategy and use of diversified funding sources, as we continue to drive transformative investments, globally and in Saudi Arabia,” said Fahad Al-Saif, PIF’s head of the Global Capital Finance Division and head of Investment Strategy and Economic Insights Division.
The facility builds on PIF’s recent success with sukuk issuances over the past two years, further bolstering its financial strength and commitment to best practices in debt management.
Rated Aa3 by Moody’s and A+ by Fitch, both with stable outlooks, PIF continues to solidify its position as a global financial powerhouse.
The fund’s capital structure is supported by four main funding sources, including contributions from the Saudi government, asset transfers, retained investment earnings, and financing through loans and debt instruments.
PIF’s strategy focuses on financing initiatives that contribute to economic growth in Saudi Arabia and internationally.
The $7 billion murabaha credit facility is expected to bolster PIF’s liquidity, supporting its investments both locally and globally.
By diversifying its funding sources through a Shariah-compliant structure, PIF looks to enhance its financial partnerships while complementing its existing financing tools, such as sukuk issuances.
This aligns with its medium-term capital strategy, ensuring flexibility, competitive financing terms, and risk mitigation.
Earlier in January, the National Debt Management Center also secured a Shariah-compliant revolving credit facility worth SR9.4 billion ($2.5 billion).
The three-year facility, supported by three regional and international financial institutions, is designed to meet the Kingdom’s general budgetary requirements.
Aligned with Saudi Arabia’s medium-term public debt strategy, the arrangement focuses on diversifying funding sources to meet financing needs at competitive terms.
It also adheres to robust risk management frameworks and the Kingdom’s approved annual borrowing plan.
PIF has been actively engaging in credit arrangements to support its investment initiatives and the Kingdom’s Vision 2030 economic diversification plan.
In August 2024, PIF secured a $15 billion revolving credit facility for general corporate purposes, replacing a similar facility agreed upon in 2021.
In addition to the revolving credit facility, PIF has diversified its financing instruments by issuing a $2 billion seven-year Islamic sukuk earlier in 2024 and planning to issue bonds in pounds sterling.
These efforts are part of PIF’s strategy to leverage a variety of funding sources to support its expansive investment activities.
Closing Bell: Saudi main market gains to close at 12,105 points
- MSCI Tadawul Index increased by 1.07 points, or 0.07%, to close at 1,510.91
- Parallel market Nomu lost 190.29 points, or 0.61%, to close at 30,864.09
RIYADH: Saudi Arabia’s Tadawul All Share Index edged up on Monday, gaining 34.87 points, or 0.29 percent, to close at 12,104.69.
The total trading turnover of the benchmark index was SR6.43 billion ($1.71 billion), as 137 of the listed stocks advanced, while 94 retreated.
The MSCI Tadawul Index also increased by 1.07 points, or 0.07 percent, to close at 1,510.91.
The Kingdom’s parallel market Nomu dropped, losing 190.29 points, or 0.61 percent, to close at 30,864.09. This comes as 36 of the listed stocks advanced, while 43 retreated.
Al Majed Oud Co. was the best-performing stock of the day, with its share price surging by 5.62 percent to SR158.
Other top performers included SAL Saudi Logistics Services Co., which saw its share price rise by 5.42 percent to SR276, and Riyadh Cables Group Co., which saw a 5.17 percent increase to SR158.80.
Al Mawarid Manpower Co. and Astra Industrial Group also saw a positive change, with their share prices surging by 5.17 percent and 5.05 percent to SR114 and SR195.40, respectively.
United International Holding Co. saw the steepest decline of the day, with its share price easing 2.45 percent to close at SR183.40.
Zamil Industrial Investment Co. and Nayifat Finance Co. both recorded falls, with their shares slipping 2.43 percent and 2.43 percent to SR36.15 and SR14.44, respectively.
National Co. for Learning and Education and Saudi Electricity Co. also faced losses in today’s session, with their share prices dipping 2.27 percent and 2.25 percent to SR197.80 and SR16.54, respectively.
On the announcement front, the Saudi Exchange announced the listing and trading of shares for Almoosa Health Co. on the main market starting Jan. 7.
During the first three days of trading, daily price fluctuation limits will be set at plus or minus 30 percent, while static price fluctuation limits will also apply.
From the fourth trading day onward, the daily fluctuation limits will revert to plus or minus 10 percent, and the static limits will no longer be enforced.
In a separate development, Almujtama Alraida Medical Co. announced the signing of a credit facility agreement with Alinma Bank worth SR45 million.
Alinma Bank saw a 0.17 percent decrease in its share price on Monday to settle at SR29.90.
The financing package includes an SR35 million revolving facility aimed at purchasing goods and an SR10 million revolving facility for capital expenditures.
The credit facilities have a duration of three years and are secured by a promissory note. The objective of the financing is to support working capital requirements and fund capital expenditures, the company stated.
Meanwhile, Mufeed Co. revealed the awarding of an SR41.5 million project focused on the development of concept, content, and execution of events aimed at reviving the Kingdom’s cultural and historical heritage.
The contract, which is set to be signed on Jan. 20, will involve a legal entity as the counterparty.
The project entails organizing unique activities designed to showcase and enhance the Kingdom’s rich historical and cultural narratives.
Mufeed Co. saw a 2.93 percent increase in its share price by the close of Monday’s trading session to reach SR73.80.
Saudi Arabia’s expat remittances up 19% to $3.21bn: SAMA
- Remittances sent abroad by Saudi nationals totaled SR6.17 billion, reflecting a 22.71% increase
- Kingdom ranks among the most affordable countries for remittance transfers, according to the World Bank
RIYADH: Expatriate remittances from Saudi Arabia rose to SR12.03 billion ($3.21 billion) in November, marking an 18.73 percent increase compared to the same month of 2023, new data showed.
Figures from the Kingdom’s central bank, also known as SAMA, indicated that remittances sent abroad by Saudi nationals totaled SR6.17 billion, reflecting a 22.71 percent increase during this period.
Saudi Arabia’s rising remittance flows underscore its growing prominence as a global economic hub and a premier destination for expatriate workers.
According to the latest Saudi government census released in May 2023, expatriates comprise 41.6 percent of the Kingdom’s population. Among the largest expatriate communities are 2.12 million Bangladeshi nationals, followed by 1.88 million Indians and 1.81 million Pakistanis.
These sizable populations highlight the scale of remittance transfers from the Kingdom, driven by competitive salaries, tax-free income, and comprehensive employee benefits.
This dynamic has positioned Saudi Arabia as a major contributor to remittance-dependent economies, supporting millions of families in South Asia, the Middle East, and Africa.
The Kingdom ranked second in the 2024 InterNations Working Abroad Index, reflecting its appeal to professionals across sectors such as finance, health care, and technology.
The Vision 2030 initiative, aimed at diversifying the economy and boosting investment, has spurred unprecedented growth in job opportunities, particularly as new industries emerge and existing sectors expand.
Expatriates in Saudi Arabia often benefit from attractive compensation packages that include housing allowances, health insurance, children’s education funding, and annual flights home.
With limited personal living expenses and no income tax, expatriates enjoy significant disposable income, enabling them to remit substantial amounts to their home countries.
According to World Bank data, the Kingdom ranks among the most affordable countries for remittance transfers, thanks to competitive fees and streamlined processes.
Digitalization is reshaping how remittances are managed, further enhancing efficiency and accessibility. Saudi Arabia’s fintech landscape, buoyed by the Vision 2030 Financial Sector Development Program, has introduced a range of innovations.
Mobile banking apps, online payment gateways, and partnerships with global remittance platforms have simplified transactions. Services such as the Saudi Payments Network, or Mada, and the adoption of blockchain technology by local banks have improved transfer security and speed.
Additionally, increased competition in financial services has driven down costs, making transfers more affordable compared to global standards.
The growing reliance on digital channels aligns with the Kingdom’s broader push toward a cashless economy. Remittance platforms integrated with mobile wallets and QR-based payments have democratized financial access, especially for lower-income workers.
As Saudi Arabia continues to implement Vision 2030’s transformative agenda, remittance flows are expected to remain robust.
The Kingdom’s focus on diversifying its economy, creating a business-friendly environment, and investing in technology will likely attract even more expatriates.
With stronger remittance infrastructure and growing digital adoption, the ease, affordability, and volume of transfers will further enhance the global economic impact of expatriate labor in Saudi Arabia.
Saudi Arabia’s e-commerce sector sees 10% growth, official figures reveal
- Logistics sector recorded 82% surge in the issuance of records in the fourth quarter of 2024
- Fintech solutions sector recorded 12% year-on-year increase with the issuance of 3,152 records
RIYADH: Saudi Arabia’s e-commerce sector saw its upward momentum continue in the fourth quarter of 2024, with 40,953 businesses now registered across the Kingdom— a 10 percent increase year on year.
The latest data from the Ministry of Commerce revealed that Riyadh led with 16,834 registrations, followed by Makkah with 10,314, and Eastern Province with 6,488. In the Madinah and Qassim regions, e-commerce enrollments reached 1,952 and 1,324, respectively.
The growth falls in line with Saudi Arabia’s ongoing transition toward a diversified, digitally-driven economy, with e-commerce playing a crucial role. The Kingdom now ranks among the top 10 countries globally in expansion of this sector.
These figures align with the nation’s goal to increase modern commerce and e-commerce’s share of the retail sector to 80 percent by 2030, as well as the government’s aspiration to raise online payments to 70 percent by the same year.
The Ministry of Commerce’s latest quarterly report further revealed that the logistics sector recorded an 82 percent surge in the issuance of records in the fourth quarter compared to the same period of 2023 to reach 16,561 registrations.
The capital led the list with 8,074 registrations, followed by Makkah with 4,235 and Eastern Province with 2,038. The Madinah and Qassim regions recorded 486 enrollments each.
Regarding application development, the report showed that the sector witnessed a 36 percent year-on-year jump in the issuance of records to reach 15,775 registrations in the final quarter of 2024, compared to the corresponding quarter of 2023.
Riyadh topped the list with 9,647 registrations, followed by Makkah with 3,191 and the Eastern Province with 1,590.
The Kingdom’s fintech solutions sector also recorded a 12 percent year-on-year increase with the issuance of 3,152 records in the fourth quarter of 2024, compared to the same period a year earlier.
The bulletin also underscored significant growth across various promising sectors, aligning with Saudi Arabia’s Vision 2030 goals.
Notable expansions were observed in several key fields, including cloud computing services, manufacturing solar panels and their parts, and real estate activities.
Growth was also seen in organizing tourist trips, entertainment events, conferences, and trade fairs.
These developments reflect the Kingdom’s strategic focus on fostering innovation and sustainable growth across diverse industries.
The ministry’s quarterly business sector bulletin provides an overview of the latest developments in the nation’s commercial environment, highlighting Saudi Arabia’s economy’s continued growth and diversification.
