Saudi low-cost carriers win concessions

17 July 2008
Saudi Arabia’s low-cost airlines have won a significant victory in their efforts to compete with national carrier Saudi Arabian Airlines (Saudia) on a level playing field.

The General Authority of Civil Aviation (Gaca), which regulates the kingdom’s aviation industry, has agreed to reduce the number of loss-making domestic routes it forces the kingdom’s three airlines to fly.

The routes that remain will be divided between Saudia and the low-cost operators, Nas Air and Sama, according to the size of their fleets.
The airlines are obliged by the government to fly to towns in far-flung corners of the kingdom. Since a fare cap is imposed on economy-class tickets and passenger numbers on these routes are extremely low, the destinations are often loss-making.

The details of the new compulsory route network have yet to be decided, but the number of destinations will be reduced to about 40 from 60. Sama and Nas Air are expected to only have to fly five or six routes each, with Saudia covering the rest.

Sama chief executive officer Andrew Cowen says the impact on his business will be huge. Previously the airline had been forced to fly 22 compulsory routes with its fleet of six planes.

“We have been lobbying for this for some time, and the social obligation routes as they were structured could have bankrupted us if we did not have generous shareholders,” says Cowen. “The new structure is much fairer.”

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