Saudi Arabian Airlines (Saudia) is close to completing a SR7.2bn ($1.9bn) Islamic loan deal to fund the purchase of new aircraft for the state-owned carrier.

The company is in advanced talks with a group of banks and is aiming to sign the deal before the end of August. The loan will have a tenor of two years.

A source in Riyadh says, “The deal should close imminently. Banks have been looking at it for a little while now and it is quite far progressed.”

Once this loan has matured a longer term financing is expected to be put in place, with a local sukuk issue among the options being considered.

The deal will be used to fund the purchase of 70 planes, split between 58 manufactured by Europe’s Airbus and 12 by the US’ Boeing. Delivery of the planes will be spread over several years with the final aircraft set to be received in 2014.

The deal has been funded entirely by Saudi banks in local currency. The bank group includes Banque Saudi Fransi, Samba, National Commercial Bank (NCB), Alinma, Arab National Bank and Sabb.

Saudia did not respond to requests to comment on the deal. The airline currently has a total of 123 planes in its fleet, including passenger jets, cargo planes and the Saudi Arabian Royal Flight Fleet.

Regional airlines have had a busy summer for ordering new planes. At the Farnborough Airshow in the UK in July Dubai-based carrier Emirates announced a $9.1bn order with Boeing for 30 new 777 aircraft.

Qatar Airways signed a $120m deal with Bombardier and a $501m order with Boeing for two 777 planes. Sharjah-based low-cost carrier Air Arabia also placed a $620m order for engines for its Airbus A320 fleet.