Saudi Arabia to include low-cost Flyadeal in privatization plan

The privatization of Saudia is expected to be completed by 2020, with an IPO of the main airline and its budget carrier unit the most likely option. (Shutterstock)
Updated 23 September 2017

Saudi Arabia to include low-cost Flyadeal in privatization plan

NEW YORK: Saudi Arabian Airlines, (Saudia) the Kingdom’s flag-carrier, is planning to privatize the main airline and the low-cost carrier Flyadeal in a single transaction, according to company plans seen by Arab News.
Most of the rest of the Saudia aviation business — cargo, maintenance, training, medical and real estate — will be privatized in a series of trade sales and public share offerings.
The whole process is aimed to be completed by 2020, with an initial public offering of a combined entity Saudia and Flyadeal the most likely option.
The Saudi Royal Fleet will not be part of the privatise plan, according to the plans.
It is believed the process of “corporatization” — removal from public ownership and establishment as a limited liability company — has already begun. The plans show a new entity, Saudi Arabian Airlines Corporation (SAAC), which could be corporatised into a holding company this year.
A Saudia spokesperson said: “One significant part of the group’s privatization plan is to incorporate SAAC to become the group’s parent company. There are no explicit decisions for this yet, but the estimated timeline is by 2020.”
The privatization of Saudia will be a significant event in the Kingdom’s National Transformation Program. Although not as valuable in monetary terms as other parts of the national portfolio — like energy and infrastructure assets — offering shares in the national airline will be regarded as a test of the Saudi public’s appetite for privatization sales.
Saudia was identified as one of the “jewels in the crown of the privatization process launched by the National Center for Privatization, the body charged with co-ordinating the Kingdom’s $200bn sell-off by the Council for Economic and Development Affairs.
The inclusion of Flyadeal in the sell-off plan is also significant. The new airline — launched as part of a liberalization of the Saudi aviation industry — has only just been awarded its air operators certificate and taken delivery of its first planes.
Flyadeal’s first route — between Riyadh and Jeddah — started on Saturday.
The spokesperson added: “The group privatization strategy covers all strategic business units excluding the Royal Fleet. The plan is to privatise Saudia and Flyadeal together under the group parent company.
Privatization is already underway in some Saudia subsidiaries. “Non-core” entities like catering and ground services are already publicly traded, while others such as real estate and the Prince Sultan Aviation Academy are “under transformation, preparing for privatization,” according to the plans.
Advisers are believed to have been engaged, but Saudia declined to identify them. “The privatization for each business unit involves the use of various external advisers — legal, financial, and strategic — in collaboration with the respective boards and the owners,” the spokesperson said.
The privatization process is expected to change the management structure and business culture at Saudia in a number of ways, formally breaking up a single corporate entity into multiple companies.
Its corporate structure will move from “divisional management to a client vendor relationship,” and from a “single marketing model to an alliance marketing model.”
There will also be an impact on Saudia’s information technology capability.
The main Saudia airline — founded in 1945 — has a fleet of 141 aircraft and recently launched its 87th destination with a route to Mauritius. Earlier this year it was named the “most improved airline” at the Skytrax world airline awards.
A new top executive team of director general Saleh bin Nasser Al-Jasser and CEO Jaan Albrecht has been in place since last year.

SAMA to become Saudi Central Bank, with full independence

Updated 25 November 2020

SAMA to become Saudi Central Bank, with full independence

  • New central bank to be linked directly to king but its president independent of government
  • Bank’s core responsibilities to maintain monetary reserves, boost confidence, trust in financial sector

RIYADH: The Council of Ministers on Tuesday approved a new law which includes changing the name of the Saudi Arabian Monetary Authority (SAMA) to the Saudi Central Bank.

Under the legislation, the new Saudi Central Bank will be linked directly to the monarch and will enjoy full financial and managerial independence.

The Saudi Central Bank Law set out three core objectives for the new institution namely, to maintain cash stability, boost confidence and trust in the financial sector, and support economic growth.

The new legislation states that the central bank is responsible for setting and managing monetary policy and it outlines the relationship between the bank, the government, and other international important organizations and bodies. It also sets a framework to govern the bank’s operations and decisions.

Fadhel Al-Buainain, an economic expert and member of the Shoura Council, said one of the important aspects of the Saudi Central Bank Law was that it was linked directly to the king.

“This enhances its full independence with respect to setting the monetary policy and the bank’s relationship with the government and global organizations,” he added.

The law states that the abbreviation SAMA, which was established in 1952, would remain unchanged due to its historical importance domestically and internationally.

“The fact that the bank will keep the SAMA abbreviation unchanged is important and reflects a wise decision because the abbreviation is widely-known,” Al-Buainain said.

While the SAMA acronym will remain, Hassan Alwatban, an economic consultant, outlined the differences between the monetary authority and the central bank.

For the central bank to perform its duties properly, he said it needed to be fully independent when it came to decision-making, especially decisions related to managing state funds.

Another difference was that the president of the central bank would not be under the state’s authority and their nomination would be made by a legislative authority. The government or state could not appoint or remove the president except by the most supreme judiciary authority.

Thirdly, he added, a government agency could not interfere in the bank’s affairs because the bank enjoyed full monetary power.

Alwatban told Arab News: “Therefore, changing the monetary authority to a central bank is healthy for the national economy.

“The tasks of the Ministry of Finance, which is responsible for financial policies, will be set apart from the tasks of the central bank, which is responsible for setting the monetary policies. Before the change, the tasks of the Ministry of Finance and SAMA overlapped.

“Besides, the Ministry of Finance was in charge of the financial policy and the monetary policy at the same time, a fact that made SAMA focus on serving the banks’ interests more than focusing on serving the interests of citizens,” he added.