Saudi Arabia allocates $3.1bn to help private sector with expat fees

Reimbursements of expat fees will be especially valuable to labor-intensive sectors such as construction, one expert said. (Shutterstock)
Updated 10 February 2019
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Saudi Arabia allocates $3.1bn to help private sector with expat fees

  • Companies that had a higher or equal number of Saudi employees versus expats will be eligible for the reimbursement or waiver of fees
  • The government has allocated 11.5 billion riyals ($3.1 billion) for reimbursements under the decision

RIYADH: Saudi Arabia has approved a scheme to reimburse some of the companies that struggled to pay steadily increasing fees for expatriate work permits in 2017 and 2018 and waive the fee hikes for some who weren’t able to pay, the labor minister said.
The government has allocated 11.5 billion riyals ($3.1 billion) for reimbursements under the decision.
“This initiative will support private sector companies, help them overcome the obstacles and achieve their goals and encourage them to expand employment of Saudi citizens,” Labour Minister Ahmed bin Suleiman Al-Rajhi tweeted on Friday.
Only companies that had a higher or equal number of Saudi employees versus expats will be eligible for the reimbursement or waiver of fees, according to the decree. Companies with a lower number of Saudis compared to expats will benefit from the initiative only after they hire more locals, it said.
“The decision will have a huge positive impact on the Saudi economy and especially the manpower intensive construction sector, which was the worst hit by the collective invoice,” Osama Al-Afaliq, head of the Saudi Contractors Association, told Reuters.
In its fiscal balance program announced in 2016 and implemented in 2017, Saudi Arabia said it would gradually increase the fees for hiring expatriates and obtaining visas for their dependents to encourage companies to hire more Saudi nationals.
It also changed the system of payment from an annual work permit renewal to a one-time lump sum payment at the beginning of the year accounting for each foreign worker employed by the company — a so-called collective invoice.
The annual fee hikes, rising gradually to 2020, were seen as crucial to Riyadh’s plan to create more jobs and cut the unemployment rate.
Some 10 million foreigners are working in Saudi Arabia.


Lessors doubt Jet Airways rescue plan, pull out more planes

Updated 32 min 23 sec ago
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Lessors doubt Jet Airways rescue plan, pull out more planes

  • The troubles at India’s Jet, which is saddled with a billion dollars in debt, have rekindled memories of Kingfisher Airlines’ collapse in 2012
  • The carrier added it was keeping its lessors informed about efforts to improve its financial situation

SINGAPORE/BENGALURU: International lessors have grounded more Jet Airways planes prior to potentially moving them out of India, as skepticism builds whether a state-led bailout of the carrier can clear their dues on time, sources familiar with the matter said.
The troubles at India’s Jet, which is saddled with a billion dollars in debt, have rekindled memories of Kingfisher Airlines’ collapse in 2012 that forced lessors to write off millions of dollars. Jet has defaulted on loans and has not paid pilots, leasing firms and suppliers for months.
“There’s some talk that the money is going to come but lessors have heard this for too long,” one leasing source said on condition of anonymity due to the sensitivity of the matter.
“We are not convinced with the restructuring plan. This is panning out just like Kingfisher. Banks took control but they never wanted to take a majority stake and run the airline.”
Nine of Jet’s planes have been grounded by lessors, versus the four it reported last month, with AerCap Holdings NV and BOC Aviation Ltd. among those who have pulled out planes, sources told Reuters.
Cross-checks of the Jet fleet by Reuters on FlightRadar24 also show that nine of its planes have stopped flying over the last four weeks. That excludes two more that are at Singapore’s Seletar Airport for, according to sources, maintenance work.
Jet, however, said on Thursday that five planes had been grounded due to non-payment of dues to lessors, as reported to regulators. The carrier added it was keeping its lessors informed about efforts to improve its financial situation.
BOC Aviation and AerCap declined to comment.
“We are waiting to see what the workout plan has in terms of us getting paid. The situation is very dicey,” an executive at another lessor said. “We have to make sure our assets are protected. Indian government and speedy resolutions are not words we normally use in the same sentence.”
Jet, after months of crisis-talks to plug a 85 billion rupee ($1.2 billion) funding hole, agreed a draft plan last week to sell a majority stake to a consortium led by the State Bank of India at 1 rupee, under regulations that permit banks to convert debt to equity in a defaulting firm.
The stake sale will be followed by an equity raising, debt restructuring and the sale and leaseback of jets, but the plan needs approvals from several stakeholders.
Jet shareholders will vote later on Thursday to provide general approvals for a debt-to-equity swap.
The airline has posted losses for four quarters, battered by high fuel prices and a weak currency. Its shares plunged 67 percent in 2018, wiping out $1 billion from its value and making it the second-worst performer among airline stocks globally.
Jet has a fleet of about 123 mainly Boeing planes, including 16-owned aircraft. The rest are leased from many lessors including GE Capital Aviation Services, US-based BBAM and Japan’s SMBC Aviation Capital, sources said, underscoring the need to get lessors on board with the bailout plan.
Jet’s management team, however, was unable to provide a timeline for the receipt of approvals and funds under the bailout plan on a call with analysts last week.
But a senior Boeing executive struck a positive note, saying “once lessors see the money come into their pockets, that’s when the edginess will go away.”
“Right now they are only seeing all this paperwork ... it will take three months for things to settle,” Dinesh Keskar, senior vice president for Asia Pacific and India sales at Boeing Commercial Airplanes, said.
Keskar said Jet’s lessors were taking deliveries of new Boeing 737 MAX planes but that they had held back 4-5 of the jets in Seattle pending payment from the Indian carrier.
The Boeing executive, however, was optimistic that the situation would stabilize in the near term.
“The government is interested in making sure that another airline doesn’t go away and another debacle doesn’t happen in a very high-growth country,” Keskar said on the sidelines of the Aero India airshow in Bengaluru.