Saudi-Iran direct flights could be 'win-win' for national airlines, analysts say

A move to restore direct flights between Saudi Arabia and Iran could potentially expand their airlines' networks, stimulate tourism, enable trade flows and support the kingdom's aviation ambitions, according to analysts.

The two countries agreed to resume flights and bilateral visits of official and private sector delegations, and also agreed to issue visas for citizens, according to a joint statement signed on Thursday.

While further details are yet to be revealed, the prospect of reinstated air services is a positive step for the travel markets in both the countries, aviation industry analysts said.

Plans for Saudi-Iran flights are “an extremely positive development and a win-win for both countries”, John Grant, senior analyst at travel data firm OAG, said.

“It will once again allow Saudi-registered aircraft to [fly over] Iranian air space, which will open up new markets to points in Central Asia that were previously prohibitive to operate. At the same time, it will provide the Iranian government with hard currencies such as US dollars for those overflights.”

Saudi Arabia has set a strategy to transform into a global transport and logistics hub and to promote itself as a tourism destination.

In March, it launched a new start-up airline, Riyadh Air, as it seeks to attract tourists and diversify its economy from oil.

The country's Saudi Aviation Strategy calls for tripling annual passenger traffic to 330 million by 2030, boosting the number of destinations to 250 from 99 at present and establishing the new flag carrier.

Easing travel with Iran could also open up another new market for Riyadh Air to develop its regional connectivity, Mr Grant said.

Besides Riyadh Air, Saudi Arabia is also launching Neom Airlines, which will be based in the planned $500 billion futuristic mega-city after which it is named.

The kingdom is also currently home to Jeddah-based national carrier Saudia and its low-cost subsidiary flyadeal.

“The relaxation of traffic restrictions between Iran and Saudi Arabia will provide network options for airlines in both countries with multiple city pair opportunities. Saudi Arabia has strong aviation aspirations, and growth in Iran will support this strategy,” Richard Maslen, head of analysis at the Capa Centre for Aviation, said.

The move will not only stimulate demand for point-to-point travel between the two countries, but could also “influence wider traffic flows in and out of Iran, where Turkish Airlines, flydubai, Qatar Airways and Emirates airlines have a notable presence”, Mr Maslen said.

The planned flights can support Saudi Arabia's Vision 2030 strategy to reduce the economy's reliance on hydrocarbons and develop strategic non-oil sectors such as aviation, said Richard Brown, managing director of London-based aerospace consultancy Naveo.

“Better relations between Saudi Arabia and Iran can only be good news for potential air travel growth between the two countries,” Mr Brown said.

“If direct flights resume between Saudi Arabia and Iran, this will benefit businesses, help make trade easier between the two countries, and foster tourism growth, supporting Saudi Arabia’s Vision 2030.”

The actual signing of an air service agreement between the two countries will offer more clarity, said aviation consultant John Strickland.

“While it is really encouraging news to see the re-establishment of diplomatic relations between Iran and Saudi Arabia, it is still very early days for airlines in the region.

“There will be a natural interest in restoring flights between two large and important markets and airlines will be drafting potential options for services between a number of major cities in the two countries. However, short-term, air service agreements will need to be reactivated and this will be the key green light for service resumption.”