Majority of airline's shares to be government owned, remainder will be sold to private investors.
By THE MEDIA LINE NEWS AGENCYsaudi airleines 248.88(photo credit: Courtesy)
Members of the Saudi Arabian government have recommended a swift Initial Public Offering (IPO) of the kingdom's national air carrier, Saudi Arabian Airlines.
The Shura Council, as the advisory body is known, has suggested an IPO instead of continuing with the airline's gradual privatization program. According to the new proposal, the majority of the company's shares would be owned by the government and the remainder would be sold to private investors.
"It's no surprise," Mark Pelling, Editor of Aviation Business, told The Media Line. "The airline has had a strategy ever since it started its privatization program to include flight services in the process."
Following the IPO of the airline's flight services, the company will decide whether to sell some of its subdivisions to private investors, such as maintenance, ground services, cargo, catering and aviation services.
The strive towards privatization puts the carrier in stark contrast to some of its local competitors, such as Emirates Airlines in Dubai and Etihad Airways in Abu Dhabi, both of which are fully government-owned and as such, do not need to disclose their earnings.
In 2006, Emirates overtook Saudi Arabian Airlines as the largest carrier in the region.
"The reason that you privatize an airline is that you want to take it away from state influence and control. You want to make it more financially independent, to stand on its own two feet," Pelling said. "It's our belief that for airlines to be independent, [being] outside state control is a good thing."
Other recommendations from the council include suggesting the airline diversify its fleet to improve competition with the low-cost airline operations in the country. Currently, the fleet is mainly made up of wide body long-haul aircraft, such as the Boeing jumbo jet 747 series and Airbus A300. In 2008, the airline ordered 12 Boeing 787s, also knows as the Dreamliner, which is perceived as the main challenger to the Airbus A380 Superjumbo, despite its smaller size.
While many of the more famous regional airlines were established in the last 20 years to boost their national economies, Saudi Arabian Airlines began running in 1945, when the then-United States President, Franklin D. Roosevelt, offered a single twin-engine DC-3 (Dakota) to then-King Abdul Aziz. The carrier serves some 70 destinations, ranging from the Middle East and Africa to North America and China.
During the annual Hajj (Pilgrimage) season, the airline operates special charter flights to fly some of the millions of Muslims from around the world to the two holy cities of Mecca and Medina, in western Saudi Arabia, to take part in the Hajj.
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