JEDDAH, 5 March 2005 — Leading Saudi travel agency Al-Tayyar, which expects its own domestic airline to take off in six months, is planning to go public within two years.
The firm, which has 130 branches nationwide and six abroad, has already sold 40 percent of its shares to firms and individuals within the travel industry.
“We decided to start the process gradually by selling shares to strategic partners before we offered them to the public,” Al-Tayyar CEO Nasser Al-Tayyar said.
He said the shares were snapped up by 25 buyers including the national carrier Saudi Arabian Airlines and the owner of Hilton hotels in Jeddah and Madinah.
Al-Tayyar has already applied for an operating license to set up its own domestic airline.
Al-Tayyar said: “We already have most of the airline infrastructure in place” and added “we just need the go ahead from the government so that we can get the pilots and planes.”
But he believes the privatization process is moving too slowly and that Saudi Arabia is being left behind by its competitors in the Gulf. “There is so much potential in this virgin market that would benefit Saudi Arabia,” he said. “But we are losing out to places like Dubai that have an open skies policy.”
The new airline would be established with an initial capitalization of $50 million.
Meanwhile, the government has formed a ministerial committee to set the rules and regulations for private airline companies to operate domestic flights.
The Civil Aviation Authority is conducting a market study on the traffic of passengers to different regions.
Al-Tayyar called on authorities to open the sector to private investment. “Why don’t we allow investors to enter this field? It’s the ideal solution to problems such as overbooking and growing demand for flights,” he told Asharq Al-Awsat, a sister publication of Arab News recently.
He expects the Ministry of Trade and Industry to approve the registration of his company in the next two months. By law, the firm must then launch a public share offering within two years.
“We expect big demand for shares. Just look at the crazy response to the Eittihad Etisalat sell-off,” he said, referring to the SR1 billion offering of stock which was oversubscribed 50 times.
Tayyar said the travel industry has benefited greatly from the booming Saudi economy, largely fueled by high oil prices over the past two years.
Tayyar hopes to open 10 branches locally and two internationally in 2005.
State-owned Saudi Arabian Airlines still has a monopoly on internal flights, despite recent government moves toward opening up the sector.
“Air travelers are still too limited in the time and date of flights. Allowing the private sector in will provide more choice,” Tayyar said.
Net profits for Tayyar’s company in 2004 reached SR76 million ($20.3 million), with SR1 billion in total sales. Growth of 12 percent was achieved over the same period.