The next Middle Eastern growth story was meant to be Iran. Over the past 18 months, many aviation financiers and investors have been eager to talk up the country's potential.

But now it is Saudi Arabia that looks set to become the focus of Middle Eastern investment. US president Donald Trump’s attitude to Iran appears to have cooled investors' hopes that the long-isolated nation might be opening up.

The heir to Saudi Arabia's throne, Mohammed bin Salman, has been vocal about reforming the kingdom, declaring: "We are simply reverting to what we followed – a moderate Islam open to the world."

Ahead of Saudi Arabia's Future Investment Summit, he told The Guardian: "We are a G20 country. One of the biggest world economies. We're in the middle of three continents. Changing Saudi Arabia for the better means helping the region and changing the world. So this is what we are trying to do here. And we hope we get support from everyone."

The appetite for change is aligned with Saudi Arabia's Vision 2030 plan, intended to lessen its dependence on oil income.

Notable among the plans disclosed so far are proposals to float Saudi Aramco for $2 trillion in 2018 and to build a vast new economic zone and city, known as NEOM, for roughly $500 billion.

It all points to a rising need for aviation services in the kingdom.

Moulay Omar Alaoui, chief executive of lessor International Airfinance (IAFC), was upbeat about Saudi Arabia's prospects during the Airline Economics Growth Frontiers conference in Dubai earlier this month.

He cited both the planned investment into more Hajj hotels and the building of resorts – such as the Red Sea one in which Virgin founder Richard Branson plans to invest – as key drivers of increased traffic.

Additionally, Alaoui said the government might plan to allocate visas to passengers flying business or first class in order to ease the process.

For the country's airlines, change is afoot. Flag carrier Saudia appointed industry veteran Jaan Albrecht as its new chief executive late last year, and recently appointed remarketing specialist Air Partner to sell 15 Boeing 777-200ERs. These, says Air Partner, are being phased out in favour of higher-density aircraft as Saudia is "undergoing a revitalisation of its fleet".

Air Partner says investments will bring the average age of aircraft in the Saudia fleet down to 3.75 years by the end of 2017.

Saudia is to operate 200 aircraft by 2020, it says. Flight Fleets Analyzer indicates that the airline has 30 aircraft on order, comprising 22 A320s, five A330s, one 777-300ER, one 787-8 and one 787-9.

Flyadeal, a budget offshoot of Saudia, has also launched, commencing flights on 23 September.

Saudi Arabia's move to initiate reform comes at a time when, with Trump in the White House, Iran's chances of an easy transition into the global marketplace look slim, and when there may be chances to pick up the slack if neighbouring economies continue to show signs of weakening. FlightGlobal schedules data shows, for example, that capacity from Abu Dhabi may be set to fall for the first time in years.

However, while Saudi Arabia looks set to provide investment opportunity for aviation finance players, a note of caution must inevitably be sounded. Plunging oil prices may have strengthened the case for change, but there remains the question of whether and how words translate into action.

Source: Cirium Dashboard