New Saudi airline operating licenses in may take 3-6 months

Updated 30 December 2012
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New Saudi airline operating licenses in may take 3-6 months

JEDDAH: Foreign airlines may need about three to six months to obtain operating licenses letting them enter Saudi Arabia’s domestic aviation market, a spokesman for the General Authority for Civil Aviation (GACA) said.
GACA earlier announced that Qatar Airways and Bahrain’s national carrier Gulf Air had become the first foreign airlines to obtain carrier licenses under which they would be able to run local and international flights in the Kingdom.
Fourteen foreign and local companies had applied for the licenses, which mark a major reform of the aviation market in Saudi Arabia.
Currently, only national carrier Saudi Arabian Airlines and budget airline National Air Services serve a domestic market of about 27 million people. Foreign carriers can only fly in and out of Saudi Arabia, not within the country.
Over 54 million passengers passed through Saudi Arabia’s 27 airports last year, up 13.6 percent from 2010, according to GACA data. But the Kingdom has one of the smallest airline networks in the region relative to its size, and passengers have complained about the limited range of flights as well as the quality of service.
In a statement to Reuters, the GACA spokesman said Qatar Airways and Gulf Air were working on final procedures for their operating licenses.
He did not comment on whether other firms among the 14 that applied for carrier licenses might eventually be successful. The 14 included firms fully owned by Saudis, Gulf firms, and consortiums of Saudi-Gulf and Saudi-Chinese companies.
Over the past year, Saudi Arabia has taken steps to liberalize its economy in several areas in an effort to create jobs and diversify away from heavy dependence on oil. For example, it is trying to develop a home mortgage industry.
Earlier this month the information minister said GACA would be allowed to grant permission for airlines to raise their fares under certain circumstances, and that fuel prices at Saudi airports would be reviewed to ensure fairer competition.
Abdulwahab Abu Dahesh, a Saudi financial analyst, said he believed the government would also remove subsidies now provided to existing Saudi airlines.
“This has to happen in 2013 because there will be no competition unless that problem is solved,” he said. “This needs to be resolved before these firms start operations.”
Qatar Airways could be a strong competitor in Saudi Arabia. It is growing rapidly, and in October became the first major Gulf airline to announce plans to join the Oneworld alliance, a global group of carriers which cooperate in areas such as route networks, frequent flyer schemes and procurement.
Akbar Al-Baker, chief executive of Qatar Airways, has said he is interested in the possibility of launching an airline in Saudi Arabia.
By contrast, Gulf Air has been struggling; last month it cut an order for Boeing planes and revised a deal with Airbus as it restructured its fleet to reduce pressure on its finances.
Nevertheless, Riyadh has been supporting Manama politically and economically during the social unrest that has plagued Bahrain since last year. A Saudi operating license could help Gulf Air by letting it diversify beyond its weak home market.
Officials for Qatar Airways and Gulf Air declined to comment on the airlines’ plans when contacted by Reuters.


Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 13 min 13 sec ago
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Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.