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Sat 25 Jan 2014 10:42 AM

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Saudi Arabia prepares for take off

Two new airlines, both with a strong heritage, are set to revolutionise the kingdom’s domestic aviation market this year, says Ed Attwood

Saudi Arabia prepares for take off

This year will finally see Saudi Arabia’s domestic aviation market open up to new competition. The kingdom’s 28 million-strong population are currently served by just two players, Saudia and flynas, both of which have price caps on their tickets. In addition, flynas operates without subsidised fuel, meaning that it is in the bizarre position of paying less for its fuel in Sudan than it does at home. By comparison, the UAE, a country of 9 million people, has four airlines.

The two new carriers both look like being potentially strong propositions. Saudi Gulf Airlines, which will be based in Dammam, is owned by the Abdel Hadi Al Qahtani Group. While the Al Qahtani Group has no previous experience in the aviation market, it has enlisted the support of Bahrain’s Gulf Air in providing consultative services as it looks to secure its licence. It has also achieved something of a coup in securing the services of Samer Majali as its chief executive.

Majali is a well-respected airline boss who was credited with Royal Jordanian’s turnaround between 2001 and 2009. He also spent a couple of years running Gulf Air, although his time at the Bahraini flag-carrier was overshadowed by a restructuring programme that is still ongoing today.

At the Bahrain Air Show, Saudi Gulf said it would buy 16 C-Series aircraft from Canada’s Bombardier. This looks like something of a punt. Bombardier has just announced that its first delivery of the C-Series will now be pushed to the back end of next year, meaning that the CS-300 (the version that Saudi Gulf has bought) won’t be delivered to its first customer until spring 2016 at the earliest. One presumes that the airline has got a hefty discount on the $2bn list price, but it does mean Saudi Gulf will be launching — either this year or next — with leased planes.

The other new player is Al Maha Airways, which is owned by Qatar Airways. We don’t know quite as much about Al Maha, except that it is due to launch operations by the end of the third quarter of this year, according to Qatar Airways chief executive Akbar Al Baker.

One advantage that Al Maha will immediately have over Saudi Gulf is its fleet; Qatar Airways can immediately siphon off any number of narrow body or even wide body jets to its subsidiary practically on demand.

There has been no official clarification on whether the price cap on tickets or the fuel subsidy will be in play for either of the two new entrants. Al Baker told Reuters last week simply that the issues had been ‘resolved’. There’s no way that the Qatar Airways boss would sanction a move into a new market if the conditions weren’t right for the carrier to be able to make a profit.

So will more airlines enter in the future? I suspect a couple are in the wings, waiting to see exactly what the new rules are, and how they pan out for the industry. After all, 14 companies originally expressed interest a licence two years ago, so the interest is clearly there.

In an interview last year, Air Arabia boss Adel Ali told me: “We would love to have a hub in Saudi Arabia because it’s the perfect scenario. But I think we need to wait and see; there’s a lot of change happening in the aviation industry there. We just need to make sure we have clarity of why we’re there and what it means.”

On page 13 of last week’s issue of Arabian Business, we incorrectly placed a picture of Khaldoun Tabari and described him as the CEO of Arabtec. He is, of course, the long-standing vice chairman and chief executive of Drake & Scull International. We apologise for this error and are happy to put the record straight.

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