RATIONAL

The development of the Saudi Aerospace industry will bring enormous benefits to the Kingdom. Firstly, developing a base of manufacturers and service providers (mainly MRO ) will allow KSA to tap into its domestic civil aviation market, which will continue to grow as Saudi Arabia opens up to travel and tourism; similarly, in military aviation there is also great potential given KSA’s large defense budget. Second, the Aerospace industry promotes the creation of highly skilled professionals who typically lead the generation of ideas that are later applied to other sectors (e.g., aerodynamics, most demanding quality standards). Lastly, involvement in the Aerospace cluster builds technological know-how/ knowledge that creates opportunities in adjacent sectors. Overall, the Aerospace cluster will increase national resilience and create rewarding jobs for Saudis.

Value Proposition

•Civil and military aircraft demand.
• Access to Aerospace raw material (Aluminum and Titanium).
• The global Aerospace market is currently growing at 4% and is estimated to reach a value of USD 850 bn by 2030 driven by the increasing number of passengers worldwide (12,726 RPK by 2030). The middle east MRO market is estimated to reach value of $18 Bn.
• Regionally, Airline traffic growth in the Middle East is projected to increase by an average of 4.5% per year (vs. global growth of 4%).
• Rise of domestic UAV manufacturers is expected due to this limited barrier to entry.
• The UAV market was valued at 10.7 bn USD in 2019.
• In KSA, commercial passenger demand is expected to 3x from 99M to 330M by 2030, driven by rising tourism and transit demand. Air Cargo demand aspirations to reach 4.5 M tons from 0.8M tons.
• The Small satellite market is currently USD 2.8 bn and will experience massive growth (20%)in the next decade across most regions.

Drivers

• Demand for civil aerospace linked to travel –driven by economic growth, demographics & globalization.

• Asia-Pacific and the Middle-East expected to have greater than the global average traffic flows.

• Last decade, growth in passenger air travel was ~6.5%, in the coming decade it is expected to average ~4%.

• Current downtown expected to spur replacement of old planes. Thus, by 2039, world fleet to go from 25,900 to 48,400 aircraft.

• USA leads in volumes imported with a sizeable 84% share from imported volumes, followed by Italy, China and Germany at 4%, 3% and 3% respectively.

• USA leads on value of imports is with 88% of imported value, followed by France, Italy and China at 3%, 2% and 1% respectively.

Drivers

• In Saudi Arabia, the mega-projects, Hajj & Umrah traffic, increasing tourism ambitions are driving greater traffic flows.

• Regional demand for civil aerospace linked to fundamental global drivers, as well as key regional drivers: tourism & transit.

• Growth in passenger air travel expected to outgrow the rest of the world at ~4.5%.

• Intra-regional integration, along with greater inter-regional integration expected to support traffic flows.

• Service market size in the Middle East is expected to reach ~USD 725 bn by 2039 with a fleet size of 3500 civil aircraft (from ~1500 in 2019).

• KSA will need to prepare for a 3x increase in passenger demand; this implies that the current fleet will need to increase by ~1.7x or 2x depending on ability to capture.

• On the cargo side, similarly, a 3x increase in cargo volume will imply a similar increase (~1.7x or 2x) in number of freighters in the country. While new passenger planes may be narrow-body with less cargo capacity, there may be scope to convert older planes to cargo aircraft.

The forecast for the value of combined commercial and defense aerospace global markets over the next decade, including services, is $8.5tn.

• Long-term Aircraft MRO demand growth was generally driven by strong fundamental demand dynamics in travel and cargo.

• Rapid demand growth in developing markets, due to fleet size expansion with older, second-hand fleets.

• Emergence of low-cost carriers across regions drives MRO outsourcing demand, given infrastructure-light business models.

• Reversal of mega size aircraft trend already ongoing with shift from wide-body to narrow-body aircrafts, also changing Aircraft MRO demand.

• United States and China together account for over half of the world’s military spending

• Saudi Arabia 5th largest defense spender

• Defense markets will have largely enduring demand driven by geopolitical and security challenges