Saudi Arabias General Authority for Civil Aviation (Gaca) will begin to privatise the operations of its airports in 2016, starting with Riyadhs King Khaled International airport (KKIA), according to a statement from the authority.
Privatising the kingdoms 27 airports, four of which are international, is consistent with Riyadhs measures to ease the impact of lower oil revenues to its budget.
The kingdom is expected to run a 20 per cent fiscal deficit of its GDP this year, which is roughly equivalent to $150bn, according to the Washington-based IMF.
A private entity called Riyadh Airports Company is expected to be formed in the first half of 2016 to operate KKIA. The rest of the aviation market will be privatised under the name Air Aviation Services Company during the second half of 2016, the statement said. This could mean only one private entity will be operating the rest of Saudi Arabias airports. A third company, to be provisionally called Saudi Company for Aviation Information Systems, will run the aviation sectors information technology (IT) operations.
While the timeline suggests urgency on the part of Gaca, the privatisation of the Saudi aviation sector does not come as a surprise.
The sector has gradually tested the market over the past few years. It began liberalising its aviation sector in 2007, by issuing licences to two new carriers that ended Saudias monopoly of the market. In 2008, Gaca signed two separate six-year contracts with international firms for the operations and management of ground handling services for three of its airports.
Two of Saudias divisions catering and ground services have also listed on the stock market in recent years.
While one of the two privately-owned airlines that began operating in 2007 ceased operations in 2010 after incurring some $300m in losses, the other private airline, Flynas, expects to become profitable this year.
Two new privately-owned airlines, Maha Airways, owned by Qatar Airways, and SaudiGulf, owned by local Qahtani Group, are currently awaiting for Gaca to release their Airline Operators Certificate (AOC) before they start offering domestic and international flights in Saudi Arabia.
The kingdom also completed its public-private partnership (PPP) airport scheme this year. The $1.2bn Prince Mohammad Abdulaziz airport in Medina was completed and began operating in June. The 25-year contract to build, operate and maintain the the airport was won by Tibah, which comprises Turkeys TAV Airports and local contracting firms Saudi Oger and Al-Rajhi Holding.
Gaca, along with transaction adviser International Finance Corporation (IFC), is now prequalifying contractors for its second airport PPP in Taif.