Saudi airports privatisation leaves more questions than answers

24 November 2015

Number of passengers passing through the kingdom’s 27 airports in 2014 is equivalent to those handled by Dubai alone

Privatising Saudi airports, and starting to do so within months, leaves more questions than it answers.

Some 74.7 million passengers and 1 million tonnes of cargo passed through Saudi Arabia’s 27 airports, four of which are international, in 2014.

This compares with 70.4 million passengers and 2 million tonnes of cargo that passed through the Dubai International airport in 2014.

Passenger traffic in Saudi Arabia’s airports grew nearly 10 per cent in 2014, which is not bad compared with 15.2 per cent recorded in Dubai during the same period.

The statement issued by the General Authority for Civil Aviation (Gaca) last week fell short on details. Other than stating that the capital’s international airport, King Khaled International, will be privatised in the first quarter of 2016, followed by the air traffic and information technology units, little else has been disclosed.

It is unclear if it will follow Dubai’s model, wherein the Dubai Airports Company was formed as a private entity to own and manage Dubai’s airport operations, or more remotely, if the government will sell its shares to a private entity.

As it stands, the prevailing regulatory and operational environment in the kingdom’s aviation sector seems to offer as much challenges as opportunities, if not more, for companies keen to participate in the kingdom’s plan to privatise its airports.

Saj Ahmad, aviation analyst at London-based StrategicAero Research, said there may not be much to incentivise private owners if those airports, under government control, could not or did not expand. He also alluded to the potential of facing government red tape when it comes to development or investment.

Consistently growing passenger traffic, attributed mainly to religious travel, is a major factor that could further drive growth in the kingdom’s aviation sector over the coming years. The number of pilgrims that will visit the kingdom for hajj and umrah is expected to reach in excess of 25 million by 2030, more than three times the number of visitors in 2014.

Some $13bn worth of expansion, renovation and new airport projects are underway.

State-backed Saudi Arabia Airlines (Saudia) has also launched major initiatives to achieve profitability by 2020, and has at least 45 Airbus fleet on order. Not to mention that Saudia’s catering and ground handling units have been listed on the Saudi Stock Exchange in 2012 and 2015, respectively, with further plans to list its cargo unit in 2016 and maintenance unit the following year.

Nevertheless, a major sense of scepticism over the privatisation plan seems to prevail, if only because “the kingdom has been relying on traffic movement from non-Saudi airlines to bolster passenger numbers,” suggests Ahmad.

This scepticism will only rise or diminish as soon as Gaca comes forward with more details about its plan.


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