Saudia won't remove uncompetitive fare subsidies

Gov’t owned airline says it won’t cut domestic fare subsidies despite two new airlines due to enter the market
Saudia won't remove uncompetitive fare subsidies
By Courtney Trenwith
Sun 06 Apr 2014 12:30 PM

Government-owned Saudi Arabian Airlines (Saudia) will not remove subsidies for domestic ticket prices, despite two new airlines due to enter the market this year, a senior executive has said.

Saudia domestic fares are fixed and had not increased for 15 years until February when a 3 percent surcharge was added to tickets purchased within 10 days of departure, angering residents.

But it had been expected that the government would be forced to remove the subsidy to create a level playing field when Al Maha Airways, backed by Qatar Airways, and Saudi Gulf Airlines, which is owned by a private Saudi business, start services this year.

Qatar Airways CEO Akbar Al Baker has said he expects the new airlines to be treated fairly, whether the fare subsidies are removed or the same is offered to Al Maha and Saudi Gulf.

The airlines are expected to attempt to compete through better services.

Saudia passenger service and sales director Saad Al Suleiman said the airline did not consider the domestic services to be profitable and they would remain at a cut-price as a “national service”.

“Fares are pre-set and the carrier has no intention of raising prices,” he was quoted by Arab News as saying.

“The carrier views low-fare domestic flights as a type of national service as opposed to a profitable sector.”

However, the gradual privatisation of Saudia may also lead to a removal of subsidies. The airline’s passenger services are still several years from being sold, though.

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