Discounted fuel deal could hamper Saudi growth says analyst
A leading Saudi Arabian newspaper Eqtisadiah has reported that the country's government is preparing to offer discounted fuel to the carrier – or carriers – selected to begin domestic operations in the country.
Qatar Airways is already believed to have registered a company for Saudi operations, Gulf Air – potentially with its fellow Bahraini carrier Bahrain Air – and, reportedly, China’s Hainan Airlines are also on the seven airline shortlist.
National carrier Saudia already receives discounted fuel. This has not been made available to other carriers in the Kingdom such as Sama and NAS despite promises.
Sama failed after being unable to meet the public service requirements for domestic flights while paying fuel costs that are among the highest in the region and delivered through a monopoly provider.
NAS is understood to have walked away from some domestic routes and focused instead on regional routes until the promised ‘level playing field’ discounts are applied on domestic routes.
Analyst Saj Ahmad said the move – if it is true – would be damaging for the Saudi market.
"It's bad enough that incumbents like Saudia and NAS Air are being thrown open to greater competition from foreign airlines, especially at a domestic level - so it beggars belief that the Saudi aviation regulator would allow new entrants to get discounted fuel,” Ahmad said. “Distorting market prices does little to foster greater competition and by right, all discounted jet fuel should be abolished - otherwise what is the purpose of subsidising new entities into the market?
“The worrying aspect for Saudia especially, is that while it has been rather slow to grow its international network, any new player can come and launch new international routes anywhere out of the country using discounted fuel. The Saudi aviation policy really needs to be examined all over again because right now, there does not seem to be any consistency or end goal that benefits anyone."
A decision on the successful airline bids is expected in October