Saudi aviation opens up to private investors

The airline, which with a fleet of 150 aircraft is the largest in the Middle East, has been boosted by increases in international passengers and cargo operations but in particular by a significant growth in Hajj and Umrah pilgrim traffic.

Saudia carried more than 16 million passengers during 2005 compared to 15.7 million in 2004. Some 3 million of these were pilgrims. The airline is also projecting a further increase in passengers to 17 million in 2006.

Last year, Saudia placed its first order for new aircraft in a decade. The $400 million deal involves delivery of 1566-seat Embraer 170 aircraft from Brazil to be used on both Gulf and domestic Saudi routes.

Private sector role

The role of the private sector in developing Saudi Arabia's aviation sector has been emphasised by Crown Prince Sultan, deputy prime minister and minister of defence and aviation. As a result a number of representatives from the private sector have been appointed to the newly constituted General Authority of Civil Aviation (GACA).

GACA is an independent state agency set up to oversee a liberalisation of Saudi Arabia's aviation sector including licensing new airline operations and development of the Kingdom's airports

At the inaugural meeting of GACA the, Prince Sultan called for the private sector to take advantage of the flexibility provided by the new civil aviation law. This allows for the entry of new Saudi airlines to compete with the national carrier on domestic routes and for involvement of the private sector in developing the country's 27 domestic and international airports.

The US's Booz Allen Hamilton has been appointed to develop a blueprint for private sector investment in the Kingdom's aviation sector. GACA is also looking at reducing taxes on airline operations.

NAS, first Saudi rival

Last July, National Air Services became the first private airline licensed to operate in competition to Saudia's domestic services. The Jeddah-based charter operator commenced operations with an exclusive business-class scheduled service, known as Al-Khayala, between Jeddah and Riyadh using an Airbus A319.

NAS' CEO and President Mohammed al-Zeer says the next move is to launch low-cost flights between a Saudi cities starting in 2006. Other commercial airline ventures are also expected to be licensed to provide services on domestic routes in addition to NAS.

Prince Bandar ibn Khalid Al-Faisal chairman of Investment Enterprises says his company is working with British-based Mango Aviation partners on setting up and managing a low-fare airline operation.

Longer term, a private-sector airline to is expected to be authorised to compete with the national carrier on international routes. The focus for the moment however, will be on privatisation of the airline's catering, cargo and maintenance operations, the first parts of Saudia to be divested to commercial investors.