Licences have been issued to the local Al-Tayyar Group, one of the kingdom's largest travel and tourism groups, and to Sama, a company set up by Investment Enterprises, chaired by Prince Bandar bin Khalid al-Faisal, in co-operation with the UK's Mango Aviation Partners, a firm specialising in the launch of low-cost airlines.

Investors in Sama include Olayan Financing Company, Xenel Industries, Saudi Industrial Services Company, Sara Development Company and Modern Investment Company for Trade & Industries, all local.

Under GACA's set of regulations, national air carrier licence-holders also must obtain a valid air operator's certificate issued by the Aviation Standards & Safety Department. It is understood that both licence-holders expect full approval to launch operations within weeks.

Sama has announced that, pending regulatory approval, it plans to launch first passenger flights on its no-frills airline around mid-year. A list of destinations still has to be announced. The company will initially operate a single 737-300 aircraft manufactured by The Boeing Company of the US. Sama signed a lease agreement for the aircraft with Abu Dhabi-based Oasis International Leasing Company (Al-Waha) in early May. Sama has appointed Andrew Cowen, who previously worked for UK low-cost airline Go, a subsidiary of British Airways, as chief executive officer.

According to an Al-Tayyar official, the group hopes to start its passenger and cargo operations within 12 months. The company is understood to be looking at leasing Boeing or Europe's Airbus aircraft, with an option to buy at a later stage. Unlike Sama, Al-Tayyar's airline will not be based on the low-cost model, the official says. With about 150 travel agencies and offices across the kingdom, the group hopes to be well placed to compete with Saudi Arabian and Sama.

Total passenger traffic in the kingdom reached 36.7 million in 2005, a year-on-year increase of 6.9 per cent.