Airline sector to boost tourism
MUCH of Saudi Arabia’s new tourism will come from two new budget airlines, scheduled to begin operations this year.
Both will service the domestic sector first before opening up to the regional market. Also increasing capacity is state-owned carrier Saudi Arabian Airlines, with the purchase of 15 new Embraer aircraft.
The first, Sama plans to start flights by the summer and expects to carry at least half a million passengers by the end of the year, the company’s top executive said. Sama, which means elevation in Arabic, will first tap the lucrative domestic market before starting regional services, CEO Andrew Cowen said. “The market here is important, with a population of more than 25 million and very strong demand from a customer base left with little choice in terms of prices,” he told media.
Sama will begin serving mainly Riyadh, Dammam and Jeddah, carrying frequent travellers and pilgrims, Cowen said. The firm aims to post a profit by end-2007 at the latest, he said. “We aim to reach 10 million passengers by 2010... from, let’s say, half a million by the end of December 2006,” Cowen added, hinting that the target for this year was a modest estimate.
With a paid-up capital of 200 million riyals ($53.3 million), Sama was founded by Investment Enterprises, chaired by Prince Bandar bin Khalid al Faisal. It has about 30 other shareholders, including the Olayan Financing Company.
Another Saudi firm, National Air Services (NAS), said last year it would launch a low-cost airline and was negotiating with European plane maker Airbus to buy four A320s. NAS says it will also set up a $100 million luxury airline, Al Khayala, to fly between the capital Riyadh and the Red Sea city of Jeddah, but has not said when either will start.
Saudi authorities are gradually liberalising air transport services by opening domestic flights to private investors. The kingdom also plans to privatise the flagship carrier Saudi Arabian Airlines, which carried 16 million passengers last year.
Privatisation is on track and will be conducted in a phased way without negative effects on its operations and services, according to the airline. The airline's catering, cargo and maintenance operation will be the first parts to be divested to commercial investors. Saudia hopes to carry 17 million passengers in 2006 and to that end, has recently purchased 15 new Brazilian-made Embraer aircraft at an estimated SR2 billion ($533 million), the first time it has done so from its own reserves. The airline will use these on both, Gulf and domestic Saudi routes.