Saudi Aviation Could Open Up Following Reorganization

 - November 28, 2011, 5:27 PM
Saudi Arabian Airlines may face stiffer competition in the future.

Civilian aviation regulation has effectively been removed from the control of the Saudi Arabian defense ministry following the death of former crown prince and defense minister, Prince Sultan bin Abdul Aziz Al Saud, in October.

On November 5, a royal decree confirmed that aviation has been separated from the remit of what was formerly called the Ministry of Defense and Aviation. It will now simply be called the Ministry of Defense and will be run by newly appointed defense minister, Prince Salman bin Abdel Aziz Al Saud. Observers within the Saudi industry have told AIN, on a not-for-attribution basis, that the change will be positive for aviation in clearing the way for a less restrictive operating and trading environment. 

Ahmed Jazzar, president of Boeing Saudi Arabia, confirmed this opinion, saying, “It is a positive move. If you look at it from a business [perspective], you will see that [the reorganization] makes a lot of sense.”

Prince Fahd bin Abdullah bin Muhammad Al Saud has been appointed president of the General Authority for Civil Aviation (GACA) with the rank of minister, with Faisal Al-Sugair as vice president. GACA formerly administered civil aviation, but was under defense ministry control. A shake-up of the of GACA’s board, as well as that of Saudi Arabian Airlines is expected, with Prince Fahd serving as new chairman of both.

“Before, civil aviation was under the Ministry of Defense,” said the official. “Now the government has separated [them]. Everybody is hoping this will help the ambitions of the civil aviation sector, which should be treated as civilian, not military. This should mean more competition, more airlines.”

Sulaiman Al Hamdan, Group CEO of National Air Services, effectively Saudi Arabia’s number-two civilian airline after Saudi Arabian Airlines, said he had “no comment” on the effective removal of civil aviation oversight from the defense ministry’s control. Under previous management, NAS lost “hundreds of millions” of dollars after being forced by the authorities operate on “unprofitable routes,” the company said at November’s Dubai Air Show.

Set up in 2007, low-cost operator Sama Airlines went out of business in August 2010 with losses of $266 million, after fuel subsidies and removal of price caps by the government failed to materialize. Saudi Arabian Airlines’ domestic near-monopoly and its enjoyment of huge fuel subsidies not allowed to competitors are believed to be behind the civil aviation sector’s slow transition to full and free competition.