JEDDAH, 2 April 2006 — Saudi Arabian Airlines is expected to sell 30 percent of its shares in an initial public offering (IPO) this year. According to informed sources, the airline has already presented its documents to the Capital Market Authority (CMA) to complete IPO procedures.
“Saudia is one of the major Saudi companies which will go public this year,” Al-Jazirah Arabic daily quoted an economic source as saying. The move comes after the Supreme Economic Council (SEC), chaired by Custodian of the Two Holy Mosques King Abdullah, approved the airline’s executive privatization plan on March 21, 2006.
Saudia has selected BNP Paribas of France as financial adviser for its privatization process. Its capital reached SR500 million in 2005 after it was SR440 million the year before. “Saudia has a total of 1.5 billion shares with a nominal value of SR10 each and will float 450 million shares for public subscription,” the source said. The government has reiterated its determination to go ahead with its strategic privatization plan, divesting control of state-run corporations and institutions with a total value of $800 billion to the private sector within the next 10 years.
Saudia has already taken a series of steps for its privatization. The process is currently focused on transforming non-core units including catering, ground handling services and maintenance as well as the Prince Sultan Aviation Academy in Jeddah into commercial units and profit centers.
Crown Prince Sultan, deputy premier and minister of defense and aviation and chairman of Saudia, signed a contract on Oct. 8, 2000 to conduct studies on the company’s privatization.
According to Khaled Ben-Bakr, director general of Saudia, the airline has completed two of the three phases of its privatization plan. The first phase included studies on the airline’s financial, administrative, operational and organizational aspects as well as restructuring of its administration, finance and operation.
Saudia posted a record revenue of SR14.6 billion last year, which is SR1 billion more than the figure of 2004, Ben-Bakr said, adding that it achieved a net profit of SR500 million in 2005.
Spelling out the airline’s achievements last year, Ben-Bakr said Saudia transported more than 16.8 million passengers in 2005, with an increase of about one million passengers compared to 2004. It also carried more than one million pilgrims from 84 international destinations to the Kingdom during this Haj season.
Saudi Arabian Airlines started out in 1945 with a single twin-engine Dakota DC-3 HZ-AAX given to King Abdul Aziz as a gift by the then US President Franklin D. Roosevelt. This was followed months later with the purchase of two more DC-3s, and these formed the nucleus of what in later years was to become one of the world’s largest airlines.
The sale of 30 percent of state-owned Saudi Telecom in an initial public offering at the end of 2002 represented the first big step in the government’s ambitious plans in which some 20 major economic sectors will be opened up for private sector participation.
The range of activities targeted includes water and drainage, desalination, air transport and aviation services, railways, roads, seaport services, postal services, municipal services such as cleaning and waste disposal and collection of revenues, building schools, printing of educational books and the management of social welfare organizations, health facilities including some hospitals, government-owned hotels and the future railway network.
