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Making privatization fly

Making privatization fly

With Saudi Arabian Airlines edging closer to full privatization, other state-owned Gulf carriers – which face increasing competition from ‘budget’ operations – look set to follow.

March 23, 2010 2:42 by

State-owned Saudi Arabian Airlines (Saudia)is moving closer to full privatization, a process it began back in 2006.

Having already split into six distinct units, the airline signed five agreements on Sunday to further ease its way into private ownership.

Perhaps most significant was the announcement that the airline has signed an agreement with an investment bank to start an IPO for part of its catering company.

Other moves include the formation of a new company for ground services at Saudi airports;a consultancy deal to finance Saudia’s new fleet of aircraft;steps to privatize the core aviation unit; and adeal to develop maintenance facilities at King Abdulaziz Airport in Jeddah.

Khaled al-Molhem, Saudia’s director general, said that the new privatization agreements were signed on the basis of a strategic plan, which would improve the performance and services of the airline’s different sectors.“The plan also envisions making Saudi Arabia the main center for commercial aircraft maintenance in the Middle East,” he said.

The airline has been doing well; according to al-Molhem, Saudi’s revenue rose by 9 percent in 2009 to reach SAR18.15 billion, an increase of over SAR1.5 billion compared to 2008.

Airlines have been at the forefront of the privatization trend in the Gulf region.

For example, the government-owned Kuwait Airways – which, according to Bloomberg, hasn’t made a profit since the 1990 Iraqi invasion – is expected to go private by the end of this year. The Kuwait Investment Authority(KIA)is forming a committee on the issue, which has a one-year deadline to implement the privatization. The cabinet “is going ahead with the privatization and the KIA has taken over the process of the legal matter to transfer the company,” airline’s chairman Hamad al-Falah told Bloomberg earlier this month. “We hope to complete the process this year.”

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