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Saudi Airlines catering unit IPO next year

Riyadh, October 16, 2009

Saudi Arabian Airlines will offer 30 per cent of its catering unit through an initial public offering in nine months as part of the national carrier's latest efforts to privatise, its top executive told Reuters.

Khalid Almolhem, director general of the airlines, also said Saudia will merge its ground handling unit with two other handlers within 2-3 months, while it planned to privatise the maintenance unit late next year. 

"We are now in the path of going further into IPO mode ... it will be the first listed company from the group of Saudia," Almolhem said in an interview.

Saudia ventured into a long process of privatisation in 2006 when it divided the company into six units; catering, cargo maintenance, airlines, flight academy and ground handling. It plans to privatise the units individually, before offering them to the public through IPOs.
   
The airline's catering unit was the first to go as Saudia sold 49 percent of it in January 2008, followed by the cargo unit which is now 30 percent owned by Tarabut Air Freight Service.

"What we try to do with the privatisation is to do a private sale, get some expertise, improve the efficiency, and then we move forward to an IPO market at a stage where there is still growth in the company ... based on that we think it is still early for the cargo to go into the IPO market," Almolhem said.   

French bank Calyon's Saudi Arabia office has been chosen to advise on the catering unit's IPO.

The airline's next move is to merge its ground handling services with two other companies in the kingdom, National Handling Services and Attar Travel Company. "This will be done toward the end of this year and that will create one large ground handling utility ... within the next two to three months we'll be done with it."    

The privatisation of the airline's maintenance unit will follow in the fourth quarter of next year. "We're going through the process to do a sales pitch, pre-qualify (companies), ask for people to bid ... then see who is the best bidder, technically and financially," Almolhem said.
   
Saudia was the sole carrier in the kingdom until 2007 when low budget airlines Nas Air and Sama airlines joined the market.

This month, a new charter airline - Alwafeer Air - received its operating license, with an eye to dominate the haj and umrah market where more than 1.5 million pilgrims fly to the kingdom from over 150 countries.

"In terms of haj, we only got about 35-40 percent of market share so it is still a significant area where other people can participate," Almolhem said.

Almolhem did not give details on whether the airline will be making any new plane orders. "We are constantly reviewing our fleet expansion and fleet replacement and we are obviously looking at ways to improve that."    

In 2007 the airline purchased and leased 50 new Airbus aircraft which it is receiving in phases until early 2012. Saudia will receive 30 Airbus 320s by the end of next year in addition to four Airbus 330s.

"We already bought them, we are getting the deliveries ...the Airbus deal is about, close to $3 billion."    

The airline also has 12 Boeing 787s in order. "The delivery (date) has yet to be identified because of the delay of Boeing and the 787 programme."    

Almolhem said the airlines carried 18 million passengers last year, and despite a 5 percent growth in the first half of this year he expects it to flatten out by end-2009.

"This has been flattening out and actually losing a little bit because of the issue with the swine flu and its effect on umra. We think this year will be flat year on year," he said. - Reuters




Tags: Airline | Saudi Arabian |

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