Saudi airline reduces flights to curb losses

23 September 2008
Sama has stopped all flights to Medina and halved its service between Riyadh and Dammam to curb losses arising from high fuel costs and the fare cap imposed on domestic routes.

The Saudi low-cost carrier, which launched early in 2007, has stopped flights to Medina from Riyadh and Dammam after losing SR40m ($10.7m) on the routes alone in the last year, despite passenger loads of 80 per cent.

Sama chief executive officer Andrew Cowen says the airline also loses SR40,000 on every flight between Dammam and the capital, despite strong passenger volumes.

The problem is due to the fare cap imposed by the Saudi government on economy class domestic flights. This means that airlines cannot pass their rising fuel costs on to the customer.

However, while Sama pays the market rate for fuel, the national carrier Saudi Arabian Airlines (Saudia) receives a substantial subsidy.

Sama and fellow low-cost carrier, Nas Air, have been lobbying the government to have the fare cap and Saudia’s subsidy removed since early 2007.

“With great unhappiness, we have no choice but to suspend services to Medina and halve flights between Dammam and Riyadh until the situation changes,” says Cowen.

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