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Saudi to open domestic market for new players says new GACA team

Posted 28 December 2011 · Add Comment

Saudi Arabia is to open up its potentially massive domestic aviation market to foreign companies following a decision to invite tenders to operate within and from the Kingdom.

Prince Fahd bin Abdullah Al-Saud,  the new president of the General Authority of Civil Aviation (GACA), said a process of tender invitations would be ready by the end of January, and that GACA would be seeking applications from Saudi and foreign airline companies as well as foreign investors who wish to operate domestic and international flights through Saudi airports.

“GACA is now working with a specialized consultant to complete some procedures related to tenders to select and license new operators,” Prince Fahd said in a statement to Jeddah’s Arab News newspaper.. He hoped that an announcement inviting tenders could be made by the end of the lunar month of Safar (Jan. 23).

GACA said it would provide airline companies that make the best offer with all facilities to operate domestic and international flights successfully. “We’ll not insist that they operate from specific airports and will give them multiple options, including free selection of domestic routes,” it added.

“Licensed airline companies will be able to operate international flights within the limits of bilateral agreements,” the GACA statement said. The licensed company will have the freedom to choose any Saudi airport as its hub and also to operate international flights.

The Saudi domestic market is currently dominated by Saudi Arabian Airlines and NAS Air. However both are believed to be losing money on the domestic routes because of a fare capping agreement with the government.

Last year a third carrier, Sama Airlines, was forced to suspend its operations citing the domestic route demands as a primary cause. The two independent carriers also claimed they were unable to compete freely with the national carrier as Saudia receives fuel at subsidised prices, allowing it to continue to serve the domestic market despite the ceiling on ticket costs.

The Arab News quoted Riyadh consultant Dr Saad Al Ahmad as saying that the Saudi government was looking to low cost regional carriers such as Air Arabia and flydubai to work with Saudis.

“What I believe is, international carriers and investors may not be that keen ... but startups like flydubai, Air Arabia and Jazeera might be interested in exploring these opportunities to set up joint ventures with Saudis,” he told the newspaper.

“What I read from the statement is that they are hoping for an international mode of action in this regard ... for example, a Saudi joint venture with a professional, experienced carrier with the Saudi partner having the major stake,” he said. “It’s just like in the United States, where the authorities do not allow more than a 25 percent stake for a foreign partner on domestic routes.”

The Saudi domestic market has an estimated 27 million people and the opening up of the market with a more than two dozen domestic airports, has huge potential.

Manufacturers such as Bombardier, ATR and Embraer will be taking a keen interest in the moves with each able to offer a “right-sized” product to cater for the limited passenger demands on “thin routes”.

Twin-turbo prop manufacturer ATR is already believed to be in talks with a potential operator.

The decision to open the market, comes  just six weeks after the ruler,  King Abdullah, split the responsibility for the aviation sector from the Defence Ministry, appointing Prince Fahd bin Abdullah bin Mohammed al-Saud, a former deputy aviation minister, as head of the newly independent General Authority for Civil Aviation.

PICTURED: Prince Fahd bin Abdullah bin Mohammed al-Saud

The new authority comes directly under the responsibility of King Abdullah, which news agency Reuters said some analysts interpreted as meaning it will have more power to institute reforms.

In April, the advisory Shoura Council recommended that the kingdom study allowing Gulf airline carriers to operate in the Middle East's largest economy.


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