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Sun 5 Jul 2009 08:45 PM

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King's advisers recommend IPO for Saudia

Shura Council suggests public offering for air carrier instead of selling off units piecemeal.

King's advisers recommend IPO for Saudia
PREFERRED ROUTE: Shura Council sees IPO as better option for Saudia than piecemeal privatisation. (Getty Images)

Saudi Arabia's Shura Council recommended on Sunday an initial public offering for flag carrier Saudi Arabian Airlines instead of selling off its units piecemeal in a privatisation effort.The council's transport and telecommunications committee made its recommendation in response to an annual report by the state-controlled firm, said Abdul-Aziz Al-Tuwaijri, a Shura member who heads the committee.

"The committee includes experts in the field ... It (committee) added a proposal by one Shura member, Saud al-Shammari, who advised that Saudia should remain under the state's control," Tuwaijri told Reuters.

"So the committee's recommendation was that the state owns the firm and a stake of its capital is sold to the public instead of selling its units to private firms," he added.

The committee's proposals were approved by the majority of the council's members, Tuwaijri said.

Shura Council members are appointed by the king. Although its decisions are not binding, it has become a forum for debate, encouraged by King Abdullah's calls for reform in the kingdom.

In 2006, Saudia launched a gradual privatisation of its catering, cargo, maintenance, ground services and aviation services units to pave the way for a flotation of a stake in its core transport unit.

It has already sold to private investors a 49 percent stake in its catering unit and 30 percent of its cargo unit.

The council also recommended that Saudia diversify its aircraft fleet to better serve domestic destinations, where the firm competes with private low-cost carriers.

"The committee noticed that the company's reports point to the high cost of operating long-haul aircrafts to serve domestic destinations. It suggested the purchase of short- and medium-haul aircraft so that reflects on the ticket price," Tuwaijri said.

Last year the carrier signed a firm order for eight Airbus A330s aircraft and 12 Boeing 787s after it ordered 22 Airbus A320s in 2007. (Reuters)

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