Saudi Arabia’s Flynas Co.’s stock fell in its Riyadh trading debut as the escalating conflict between Israel and Iran reverberates across regional equity markets and pressures airline stocks.
Shares in the low-cost carrier closed 3.4% lower at 77.3 riyals apiece, after swinging between sharp losses and gains. Trading was briefly halted twice in the first 20 minutes. Saudi Arabia’s main index fell over 1%.
The Flynas deal was priced at 80 riyals per share last month, the top end of the marketed range which valued the company at 13.7 billion riyals ($3.65 billion). The order book exceeded $100 billion for the $1.1 billion share sale.
The Israel-Iran conflict likely weighed on trading, with airline shares under pressure as several regional countries shut their airspace to commercial flights. The United Arab Emirates’ Air Arabia is down 5.5% this week, while Kuwait’s Jazeera Airways slipped 3% on Wednesday after posting its steepest drop since 2020 on Sunday.
Flynas’ Chief Executive Officer Bander Almohanna told Bloomberg News that while regional developments have added complexity, the airline’s “point-to-point model and diversified network have ensured minimal disruption.”
The geopolitical tensions are fueling risk aversion toward equities — especially airline stocks in the region — and making investors nervous, said Vijay Valecha, chief investment officer at Century Financial.
Flynas, backed by billionaire Prince Alwaleed bin Talal, marks the Middle East’s largest IPO so far this year and is the first airline in the region to go public in almost two decades.
Airspace disruptions were most severe on Friday in the region after Israel halted overflights and Iran ceased operations at its main airport in Tehran. Iraq, Syria, Jordan and Lebanon have gone back and forth between closing and opening airspace as Israel and Iran exchange fire.
Flynas may be able to weather a prolonged regional conflict by leveraging demand for outbound travel and religious pilgrimages, according to Lukas Muehlbauer, a research analyst at index provider IPOX Schuster LLC. Its position within Saudi Arabia — the world’s largest oil-producing nation — may also insulate it from the fuel price volatility affecting other airlines, Muehlbauer said.
Regional airlines have been enjoying strong revenues and unprecedented demand, with heavyweights Qatar Airways and Emirates Airline both reporting record earnings for the last two years.
Gulf carriers are also expanding, ordering hundreds of billions of dollars of jets from planemakers Boeing Co. and Airbus SE. Flynas signed an initial agreement for 160 aircraft last year, including Airbus’s A320 narrowbody jet and its first purchase of the widebody A330 aircraft, as it looks to grow its fleet and meet rising demand.
Saudi Arabian firms have raised $3 billion so far this year through IPOs, making it the busiest Middle Eastern venue for first-time share sales.
The muted start for the Saudi airline comes after a weak debut from United Carton Industries Co., as the broader Saudi stock market has become one of the worst performers globally and market participants warn of lofty valuations. It’s all a shift from a few months ago, when newly-traded Saudi equities posted double-digit gains in early trading and outperformed peers in the Middle East.
“Flynas valuations were at a premium to other regional airlines on the back of strong growth and the Saudi aviation narrative,” said Nishit Lakhotia, head of research at SICO Bank. “However, despite the massive oversubscriptions and strong response to the IPO, the timing of the listing was far from optimal given the current geopolitical situation.”
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