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Sun 6 Nov 2011 08:53 AM

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Saudi aviation switch could speed up airline sale

Launch of civil aviation authority could spur privatisation of flagship carrier SAA

Saudi aviation switch could speed up airline sale
The Saudi government has been trying to privatise SAA for many years.

Saudi King Abdullah on Saturday ordered the establishment of an independent civil aviation authority and put its head in charge of the board of Saudi Arabian Airlines, a move that could help speed up privatisation of the national carrier.

The decision came as part of a series of royal decrees published on state media that separated civil aviation from the Ministry of Defence and Aviation following the death of Crown Prince Sultan, who was also in charge of the ministry.

The decree ordered all duties and responsibilities of civil aviation be transferred from the Defence Ministry to the General Authority for Civil Aviation, which comes directly under the king in his capacity as prime minister.

King Abdullah, who had spearheaded economic reforms in the world's top oil exporter, named Prince Fahd bin Abdullah bin Mohammed al-Saud as head of the new aviation body, which is likely to oversee the eventual privatisation of the airline and will report directly to the king.

"He's been in the sector for some time as assistant to the former crown prince," said Hossein Shobokshi, a Saudi columnist.

"He's familiar with the sector. Now that he's officially in control of it, he will be handling the privatisation of the airline, the liberalisation of the skies, allowing competition and probably developing the airports into profit centres on their own."

The king also ordered restructuring of the board of Saudi Arabian Airlines but names of the new board are not yet known.

The Saudi government has been trying to privatise the airline, one of the largest in the Middle East, for many years. It launched the process in 2006 by dividing up the company into six units, with a view to selling each separately. These include catering, cargo, maintenance, airlines, flight academy and ground handling.

"It is becoming economically a burden on the government to carry the file of the aviation sector while it needs to be reformed and restructured. It has to be done in a separate platform," Shobokshi said.

Saudi Airlines Cargo has been privatised, with 30 percent now owned by Tarabut Air Freight Service, while the ground handling services unit was merged last year with National Handling Services and Attar Travel Company.

The airline, which has 137 aircraft in its fleet, said earlier this year it hopes to hold a much-delayed initial public offer of its catering unit estimated to be worth up to $540m by end of 2011.

The catering unit was first to be privatised, by selling 49 percent to investors in 2008 and is now completing requirements to offer 30 percent to the public. French bank Credit Agricole is advising on the planned IPO.

The maintenance unit will start making arrangements to sell a stake later in 2011, officials have said.

The chairman of the board, has said that the company was trying to restructure the airline unit before selling it, which he said will take some time before it can be privatised.

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Ibrahim 8 years ago

This move from the Saudi Government is crucial. Its will have a significant impact on the region . . . interesting time to see

Patrick 8 years ago

I always wondered for how long this overstaffed company would continue in its present state.

If it wants to compete with Emirates, Etihad and Qatar Airways then it must implement these changes and do it quickly.

The deregulation of the Saudi market makes it a ripe candidate for another airline that, if well run, could challenge Saudi Airlines, not just on home turf, but internationally as well.

The contenders to date, Sama (defunct), Wafeer and NAS (struggling under poor and constantly changing management) have been just blips on Saudia's radar and never posed any real threat.

Saudia now has an opportunity to weed out the unproductive elements within and turn this into a lean company that can compete with the other major players in the region and take its rightful place as a first rate carrier; it's about time.

Steve 8 years ago

Interesting times ahead - lets hope that the privatisation is allowed to go ahead without too much political intervention. Saudi Arabia has the potential to dominate Middle East aviation especially with its geographical location at the cross roads of east-west traffic and gateway to Africa.