JEDDAH, 5 March 2007 — Saudi Arabian Airlines will sell 49 percent of its catering services for SR1.4 billion, informed sources said yesterday. The national carrier will announce the deal within a few days, they added. They said the company had received offers ranging between SR630 million and SR1.4 billion from leading bidders.
Saudia had said earlier that it would privatize the catering services by the first quarter of this year and cargo services in the last quarter. The ground services and technical affairs division will be privatized in the first quarter of 2008. The move comes as part of Saudia’s efforts to improve its services.
According to one source, the winner of the catering services deal is a coalition of Saudi and Spanish companies. Saudia announced in August 2006 its plan to sell 30 to 49 percent of its shares in the catering company to the private sector. As many as 71 companies had expressed their desire to join the fray.
Saudia Catering is one of the airline’s most successful investment projects. Established in 1981 as a small catering unit at King Abdul Aziz International Airport in Jeddah, Saudia Catering has now become a huge institution with full-fledged units in Jeddah, Riyadh, Dammam, Madinah and Cairo. It serves not only Saudia flights but also 54 foreign airline companies.
Saudia Catering supplies 20 million meals annually. Last year it recorded a revenue of SR643 million and a net profit of SR142 million. In 2006, the meals supplied by the company rose by 5.1 percent while the number of flights served by the company rose by 8.3 percent. Following the sale, the board of directors of the company would be reshuffled with Saudia holding four seats and the rest going to the new company. The new company will sign a contract with Saudia to provide catering services to its flights. It will also serve the needs of foreign airlines operating in the Kingdom.
There are 3,000 employees in the catering section. Saudia sources ruled out suggestions that the new company would cut the number of workers currently employed with Saudia Catering.
Khaled Al-Mulhim, director-general of Saudi Arabian Airlines, has urged Saudi businessmen to form alliances to participate in Saudia’s privatization program, especially in the managing of services such as air cargo and ground services. He said Saudi Airlines would be transformed into a holding company in the last phase of its privatization program and will have a group of companies under its administration.
Saudi Airlines is reportedly in negotiations with Boeing and Airbus to purchase new aircraft worth $12 billion (SR45 billion) to strengthen its fleet and provide seats to its growing number of passengers. The deal to purchase around 60 planes will bolster the airline’s current fleet of 139, helping it to counter the challenges posed by regional and international airline companies. Al-Mulhim said the number of visitors to the Kingdom would triple from a current 3.5 million in the next 10 years as growing numbers of Muslims visit the country for Haj and Umrah. Saudia carried a record 17.57 million passengers in 2006, registering an increase of 471,462 passengers from the previous year.