Riyadh must speed up aviation sector reforms

26 September 2008
Unless Riyadh accelerates reforms, low-cost carriers could cut services even further and the kingdom will squander the gains it has made.

The only surprise about Sama Airline’s announcement that it is cutting domestic routes to curb losses is that it has taken so long.

Saudi Arabia has the potential to be one of the most progressive aviation markets in the region.

It was one of the first to begin privatising its national carrier, and the market was given a further boost with the launch of two low-cost airlines early last year.

With the largest economy in the GCC and huge volumes of tourists, Saudi airlines should be in an enviable position.

Instead, the glacial pace of decision making in Riyadh is dragging the sector backwards.

The privatisation of Saudi Arabian Airlines (Saudia) is taking an age. Part of the catering business was sold last year and a stake of the cargo division followed in September.

Although a winning bidder for the cargo arm was chosen in February, it took a further seven months for the deal to be confirmed.

Three further business units will follow before the airline itself is put up for auction. At this rate, the process will not be completed until well into the next decade.

Meanwhile, the treatment of the low- cost carriers Sama and Nas Air has been shameful. Both airlines launched on the understanding that the unfair advantages enjoyed by Saudia - in particular its large fuel subsidy - would be removed promptly. They are still waiting.

The cap on domestic fares, while intended as a benevolent gesture to make air travel affordable for all Saudis, has left the airlines completely exposed to the hike in fuel prices, and unable to pass on the higher costs.

Unless Riyadh accelerates its reforms, the low-cost carriers could cut their services even further and the kingdom will squander the gains it has made so far.

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