flynas: Saudi budget airline gets off stormy start on Tadawul debut

Riyadh: Saudi Arabia's flynas Co.'s shares whipsawed between gains and losses 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 fell 13% to SR69.90 riyals a piece before reversing losses to gain as much as 5%. Trading was briefly suspended twice within the first 20 minutes of the session. Saudi Arabia's main exchange dropped 1%.

The Flynas deal was priced at SR80 per share last month, the top end of the marketed range which valued the company at SR13.7 billion ($3.65 billion). The order book exceeded $100 billion for the $1.1 billion share sale.

The mixed open 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.

The Israel-Iran conflict likely complicated trading, with airline shares under pressure as several regional countries shut their airspace to commercial flights. The UAE' Air Arabia is down more than 3% this week, while Kuwait's Jazeera Airways fell as much as 4.2% on Wednesday after its worst drop since 2020 on Sunday.

"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."

flynas 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.

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. Its position within Saudi Arabia 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 plane-makers Boeing Co. and Airbus SE. Flynas signed an initial agreement for 160 aircraft last year, including Airbus's A320 narrow-body jet and its first purchase of the widebody A330 aircraft, as it looks to grow its fleet and meet growing 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.