Mon, Nov 07, 2011 - Page 11 News List

Saudi reforms could speed airline sale

OPEN SKIES:Columnist Hossein Shobokshi said the aviation sector had become an economic burden on the government, so it would be liberalized and made profitable

Reuters, DUBAI

Saudi Arabian King Abdullah on Saturday ordered the establishment of an independent civil aviation authority and put its head in charge of the board of Saudi Arabian Airlines, a move that could help speed up privatization of the national carrier.

The decision came as part of a series of royal decrees published on state media that separated civil aviation from the Ministry of Defense and Aviation following the death of Crown Prince Sultan, who was also in charge of the ministry.

The decree ordered all duties and responsibilities of civil aviation to be transferred from the defense ministry to the General Authority for Civil Aviation, which comes directly under the king in his capacity as prime minister.

King Abdullah, who had spearheaded economic reforms in the world’s top oil exporter, named Prince Fahd bin Abdullah bin Mohammed al-Saud as head of the new aviation body, which is likely to oversee the eventual privatization of the airline. He will report directly to the king.

“He’s been in the sector for some time as assistant to the former crown prince,” said Hossein Shobokshi, a columnist.

“He’s familiar with the sector. Now that he’s officially in control of it, he will be handling the privatization of the airline, the liberalization of the skies, allowing competition and probably -developing the -airports into profit centers on their own.”

The king also ordered restructuring of the board of Saudi Arabian Airlines, but names of the new board are not yet known.

The Saudi government has been trying to privatize the airline, one of the largest in the Middle East, for many years. It launched the process in 2006 by dividing the company into six units, with a view to selling each separately. These include catering, cargo, maintenance, airlines, flight academy and ground handling.

“It is becoming economically a burden on the government to carry the file of the aviation sector while it needs to be reformed and restructured. It has to be done in a separate platform,” Shobokshi said.

Saudi Airlines Cargo has been privatized, with 30 percent now owned by Tarabut Air Freight Service, while the ground handling services unit was merged last year with National Handling Services and Attar Travel Company.

The airline, which has 137 aircraft in its fleet, said earlier this year it hopes to hold a much--delayed initial public offer (IPO) of its catering unit estimated to be worth up to US$540 million by the end of this year.

The catering unit was first to be privatized, by selling 49 percent to investors in 2008, and is now completing requirements to offer 30 percent to the public. French bank Credit Agricole is advising on the planned IPO.

The maintenance unit will start making arrangements to sell a stake later this year, officials have said.

The chairman of the board has said that the company was trying to restructure the airline unit before selling it, which he said would take some time before it can be privatized.

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