Saudi aviation overhaul reaches milestones despite setbacks

12 January 2017

Tender for Taif airport PPP and second operator at Riyadh airport due in 2017

Saudi Arabia’s General Authority for Civil Aviation (Gaca) has formed an airport company for the Riyadh airport, appointed a private operator for the newly completed Terminal 5 at the airport, and took concrete steps to revive the procurement process for Taif International airport within a year of announcing plans to privatise all its airports by 2020.

Equally significant is the start of commercial operations of two privately-owned low-cost carriers – SaudiGulf and Nesma Airlines – in 2016. The kingdom’s first privately-owned carrier, Flynas, is also set to sign an $8.6bn contract on 16 January with France’s Airbus for dozens of new planes.

State-backed Saudi Arabian Airlines (Saudia) received 63 new aircraft in 2016 and appointed a new CEO, Jaan Albrecht, formerly of Turkey’s SunExpress and Austrian Airlines, who is understood to have assumed the post this January.

A tender for a second private cargo operator at the Riyadh airport is due to be released in February. Ireland’s Dublin Airport Authority (DAA) operates Terminal 5, which opened in June 2016.

The plan to privatise the kingdom’s airports have also faced early setbacks including stalling the Taif airport PPP procurement process and breaking off its deal with the International Finance Corporation (IFC) to advise on the project, presumably in order to re-align Gaca’s proposed projects with the National Transformation Plan (Plan).

The IFC advised Gaca on the development of its first airport PPP, which entered full operations in June 2015.

The aviation regulator now says it has revived the project with a tender for the contract to design, build, operate and maintain the airport due this year.

The aviation regulator also cancelled in late July 2016 a bid for the contract to operate and maintain (O&M) the King Abdulaziz International airport (KAIA) in Jeddah. Two firms, one comprising a joint venture of France’s Aeroports de Paris Managements (ADPM) and Saudi Binladin Group, and Singapore’s Changi Airports International, submitted an offer for the contract prior to its cancellation.

A major setback faced in 2016 was putting on hold the construction work to upgrade two of the four existing terminals at Riyadh airport. The contract was awarded in 2015 to a joint venture that includes Nahdat al-Emaar, whose 55 per cent shareholding was owned by Germany’s Hochtief.

If everything goes to plan, 2017 will see the launch of a state-backed low-cost carrier Flyadeal, also owned by Saudia, and most likely some movement on the long-delayed IPO of the remaining sectors of the carrier. Expansion work on the Jeddah airport, the kingdom’s busiest, is also expected to be completed this year.

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