Alan Peaford
Saudi Arabia is on the verge of privatising Saudi Arabian Airlines, the national airline, and allowing a number of small private operators to form airlines for the Kingdom's domestic market.
There has been concern for some time that Saudia has been making greater losses and would not be attractive for private investment.
The airline has been using its fleet of Boeing 747 aircraft to meet its short-haul domestic requirements.
The airline has also been delaying the purchase, agreed more than two years ago, of 61 aircraft.
Last week, bankers in London and the Middle East said Saudi Arabia is seeking a sovereign-backed loan for some $4.5 billion to pay for the fleet of US airliners in what was virtually a government-to-government deal.
Confirmed
If these are confirmed this week, analysts believe this will signal the move towards the privatisation of the airline.
Already, press reports in the Kingdom have indicated that the government will welcome new private airlines to operate domestic routes.
Several prominent Saudi businessmen have reportedly expressed willingness to be involved in a new launch or in the hiving off of the domestic routes of the Saudia network and the formation of a joint venture with the government-owned airline.
Banking sources watching developments expect the Saudis to approach the market within the next few weeks - the first time that the nation has looked externally for funds since the Gulf War.
Interest
Saudi Arabia will undoubtedly be able to tap into highly-advantageous interest rates - all the more so thanks to recently hardening prices for its oil exports.
US bank JP Morgan, which has been advising the Saudis in connection with the deal, is considered the prime candidate the head the project and, one London banking source suggests, may already have been mandated to raise an initial tranche of cash.
It is understood that Inter-national Aero Engines, which produces the V2500 for the MD-90, expects initial deliveries to take place shortly.
Its requirement is increasingly urgent as the planned delivery schedule of Boeing and former McDonnell Douglas types slips further behind.
A minimum of one 747-400 and two 777s, and almost certainly more aircraft, have been built for the carrier by Boeing at Seattle but not yet delivered.
Completed
At least some, possibly all, of the MD-11 freighters ordered have also been completed. Boeing declines to comment.
Although a clear-cut schedule was never made public at the time, the initial agreement between the airline and what was then Boeing and McDonnell Douglas envisaged the following delivery timetable for the 61 aircraft ordered:
Five GE CF6-powered 747-400s starting in September 1997 with two deliveries this year, two in 1998 and one in 2001; 23 GE90-powered 777-200s starting in October 1997, with six coming this year, eight in 1998, five in 1999, two in 2000, and two in 2001; 29 MD-90-30s starting in October this year, with four coming this year, 14 in 1998, eight in 1999 and three in 2000; and four MD-11Fs for delivery between July and October this year.
The domestic challenge for Saudia - which carries 12.5 million passengers annually - has been great. The Kingdom covers an area of more than 2.2 million km2 with a growing population and improving infrastructure. More people want to travel and the government has been anxious to keep the prices for domestic travel to a minimum and has subsidised fares.
A spokeman at Saudia says an internal study on creating a separate company is being carried out and will be released soon.
(Additional reporting by Kieran Daly of ATI, London.)
Source: Flight Daily News
