Saudia’s privatization plan on course, says director general
Khaled Al-Molhem, director general of Saudi Arabian Airlines, center, signs a memorandum of understanding with Fahd Almubarak, chairman of Morgan Stanley Saudi Arabia, and Ahmed Fareed, CEO of Al-Ahli Capital, in Jeddah. (AN photo by Adnan Mahdali)
Published: Mar 9, 2010 23:25 Updated: Mar 9, 2010 23:51
JEDDAH: The privatization of Saudi Arabian Airlines is progressing as planned, its director general has said. Khaled Al-Molhem added that the organization's core aviation unit could be privatized within 24 months.
Speaking to reporters after signing a memorandum of understanding with Al-Ahli Capital and Morgan Stanley, who will act as financial advisers for the airline's privatization, he indicated that the airline would sell part of its stake in the core aviation unit to a consortium of national companies.
Al-Molhem, who oversaw the privatization of the Saudi Telecom Company (STC) before joining Saudia, said technical procedures to privatize the airline would be much easier this time round.
He said the privatization of the organization's catering and cargo units was successful. A consortium comprising Abdul Mohsen Al-Hokair Tourism and Development and the Fowzan Holding and Newrest Group bought 49 percent of Saudia Catering, while Tarabut Air Freight Services bought 30 percent of Saudia Cargo.
"The financial consultants will set up the basis for the airline's privatization within the next 24 months," Al-Molhem said, adding that the transfer of employees from the public to the private sector would be completed as per the plan.
He expected the privatization of the maintenance service unit to be completed by the beginning of next year at the latest.
"Our privatization plan is going ahead successfully as planned," he added.
The airline had signed an agreement with BNP Paribas, who will act as adviser for the privatization of the technical service unit.
There are more than 5,600 employees in the maintenance sector, with Saudis accounting for 87 percent. They are distributed among 26 domestic and 30 international stations.
Economic observers believe that the privatization of Saudia's core aviation unit would not take a long time.
Two years ago it signed deals with Airbus and Boeing to purchase 70 new aircraft at a total cost of SR10 billion.
The new aircraft deal was self-financed for the first time and reflects the airline's financial strength. The purchase includes 58 Airbus planes and 12 Boeing 787s.
Saudi Airlines, which was established about 60 years ago, has played a significant role in the Kingdom's development and connecting the country with other parts of the world.
The airline operates flights to 80 domestic and international destinations, and transports more than 18 million passengers, including a large number of pilgrims, annually.
The airline's cargo unit posted revenues of SR1.7 billion in 2007 and a net profit of SR307 million. The result encouraged companies to buy 30 percent of Saudia Cargo's stake.
Saudia, which has a fleet of more than 100 aircraft, employs more than 18,000 people.
Comments
KALEEM KHAN
Mar 10, 2010 14:16
Report abuseThis is the news which i had been waiting since long time, i hope Mr. Khalid Molhem deserve a performance award for the same , as we had seen the drastic change in the STC , now we hope the same will be in the Saudi Airlines , i wish the privatization will complete ASAP. for the good service
Regards
Kaleem Khan.
MOHSEN AHMED
Mar 10, 2010 15:34
Report abuseKUKU
Mar 10, 2010 15:36
Report abuseN.GULZAR
Mar 10, 2010 20:21
Report abuseDIHAN ABOOSALLY
Mar 11, 2010 13:59
Report abusePrivatization of the Saudi Arabian Airlines would allow the airline an opportunity to identify internal and external barriers which were not previously evident, thus helping them to improve performance efficiencies from Logistics management, Catering , In-flight services ,Staff training and maneuver through the other intricacies that may arise in the future.
However, the article doesn't mention that if this option of privatization is a "Growth strategy" or a "Survival strategy" in the highly competitive global airline industry.
The global airline industry is one of the most competitive industries in the world, and the only way an airline can make a difference and persuade customers to travel is through service and not through price.
Privatization is not a fairytale story and would not help create employment, boost revenue & add new sectors. It will only be the milestone and the rest will have to done with the coalition of the entire organization.
Privatization will refer to high administration cost, and other unforeseen expenses, which obviously can be covered if the load factors are full on all local & international flights in & out of the Kingdom of Saudi Arabia.
However it's a good start to help the airline grow and dominate other leading world class carriers!