By Wael Mahdi and Reuters
Parent NAS seeks $4bn to fund fleet growth as budget carrier ends monopoly of Saudi Arabian Airlines.
Nas Air has ended the monopoly of Saudi Arabian Airlines by taking over a series of major destinations from the national carrier.
The country’s first budget carrier, Nas Air operates from Riyadh. It will link the capital to destinations including Dammam, Tabuk, Abha, Qassim and Hail, which Saudi Arabian Airlines ceased to serve from today.
Nas Air agreed with Saudi Arabian Airlines in September to take over several public service obligation routes from the end of October in accordance with the Air Traffic Privatisation Act.
Under the act, civil aviation regulator (GACA) granted licenses to budget carriers to operate in the Kingdom, and set mandatory destinations to be served by each airline.
As a result, part of the domestic routes operated by Saudi Arabian airline will gradually move to Nas Air.
The Saudi government is restructuring its economy after its accession to the World Trade Organisation (WTO) to allow for more room for competition in strategic sectors such as aviation and telecommunication where its state-owned companies have had a long monopoly.
The new destinations take Nas Air routes from four to 21, increasing weekly flights from 70 to 356. The carrier is offering fares of 49 Saudi riyals ($13) per seat on the new routes.
One of the two airlines owned by National Air Services (NAS), Nas Air has announced it is to add four new Airbus A320 aircraft to its fleet to meet demand on the new routes.
NAS said on Monday it plans to borrow as much as $4bn during the next five years to finance aircraft purchases, including from European planemaker Airbus.
The operator is in final talks with Gulf Arab and international banks about securing financing, CEO Taher Agueel told Reuters by telephone. He declined to identify any of the lenders.
“The $4 billion covers fleet acquisition of 98 aircraft over five years” Agueel said. “We hope to finalise borrowing facilities for certain parts of near-term purchases and it should be done in the next few weeks” he said, declining to be more specific.
Agueel told Al Arabiya television news in June the firm would raise funds through the sale of Islamic bonds, or sukuk.
“We have not committed to any tool” he said. “We are interested in sukuk, but with the credit situation today, we are leaving all our options open”.
NAS also plans to raise funds by selling shares to the public for the first time next year, Agueel said. “30% is the minimum” said Agueel. “I’d like to raise as much as possible”.
NAS has a fleet of 49 aircraft from companies including Airbus, Boeing, Gulfstream, Dassault and Raytheon. It signed a 9 billion riyals ($2.4 billion) agreement with Airbus for the purchase of 38 A320 aircraft at the last Paris Air Show.
“NAS business will boom and it will become a major local airline,” said one travel expert. “Since it launch in February, Nas Air’s daily number of flights has been increasing by 500%, a figure unmatched by most of Middle East’s private carriers,” he added.
Ayman Awad, executive coordinator for one of the Middle East’s largest travel groups, expects NAS to become a major player in the sector after it bought a large stake in UNASCO, the largest ground services company in Saudi Arabia.
“UNASCO was a dominant company that handles ground services activities in all major Saudi airports. The addition of UNASCO to the business portfolio of NAS will boost the company’s air and ground activities,” said Awad who works for Kanoo Travel Agency which owns a major stake in UNASCO with NAS.
Sama Airline, the second private airline in Saudi Arabia and a major competitor to Nas Air, has announced that starting from Tuesday it will operate six new destinations from Dammam, increasing its total local destinations to 12. Sama also announced the offering of low fares on its new routes.