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Published on : Monday, December 2, 2013
“Al Maha Airways”, the Saudi Arabian carrier of Qatar Airways has said that it will not start operations until the first half of 2014 at the earliest. While Qatar has been unusually quiet on the operation and is not known to have ever stated a launch date, Saudi regulators had said it would launch before the end of 2013 as part of its liberalisation process. Qatar, along with a Gulf Air-linked group, was awarded in Dec-2012 a license to operate domestic flights in Saudi Arabia as part of overdue reform in the aviation and tourism sector.
The Saudi government is right to rejuvenate the sector, but reform in early initiatives – the privatisation of Saudi Arabian Airlines – has proven slow. It now seems loosening the reins on the domestic market is more challenging than imagined by regulator General Authority of Civil Aviation. GACA says it has had prolonged negotiations with government entities to reduce fuel prices for new carriers. Saudi Arabian Airlines receives fuel subsidies that distort the market and forced the exit in 2010 of start-up Sama. A cap on domestic fares makes some flights unprofitable even for Saudi. Qatar Airways CEO Akbar Al Baker told Reuters in reserved remarks he has “undertaking” from Saudi authorities that these two “contentious issues” will be resolved. While domestic growth has lagged international growth – creating opportunity – there are, as Mr Baker said, “many challenges”.
Al Maha could be Saudi’s only third carrier. Saudi Arabian Airlines’ monopoly was ended in 2007, which saw the entry of nasair (now flynas) as well as the entry and subsequent exit of Sama. nasair expects to have its first full-year profit in 2013. Saudi is preparing for change – and has joined SkyTeam – but it has a formidable position, having carried 94% of domestic passengers in 2011 (the most recent figures available). Saudi flies 84% of the international traffic handled by Saudi Arabian carriers, while Nasair has 14%. But in the overall market, foreign carriers dominate and provide over 60% of international traffic. Their share is also growing. Privatisation is crawling along at Saudi Arabian Airlines while the government is planning more airport infrastructure and the overall market continues to grow and have record years.