Qatar Air Vies With China’s Hainan for Saudi Services

Qatar Airways Ltd. and China’s Hainan Airlines Co. are among carriers vying to offer domestic flights in Saudi Arabia after an initial 14 applicants were cut to a shortlist of seven, the kingdom’s aviation regulator said.

Other operators still in the running after an assessment of financial strength and experience include Gulf Air of Bahrain and rival Bahrain Air, Khalid al-Khaibary, a spokesman for the Saudi General Authority of Civil Aviation, said in an interview.

Domestic flights in the largest Arab economy are currently limited to Saudi Arabian Airlines and discount carrier National Air Services. With travel demand increasing as the population of 28 million grows by 3 percent annually, more than one license may be awarded, al-Khaibary said, with winners to be announced in October and flights starting by the fourth-quarter of 2013.

“The authority aims to establish a more competitive environment in the aviation sector, especially with demand exceeding supply and creating reservation bottlenecks,” al- Khaibary said by telephone. “Companies will be able to choose which points to serve and choose any airport as a base.”

Qatar Air ranks as the second-biggest Middle Eastern carrier, behind Dubai-based Emirates, while Hainan Air, the fourth-largest Chinese operator, has interests in 13 other airline companies via parent HNA Group Co.

Egyptian Bids

Also shortlisted are Egyptian carrier Almasria Universal Airlines, supported by the Saudi Arabia-based Islamic Development Bank, and Nesma Airlines, also from Egypt, backed by diversified Saudi group Nesma Holding Co. Dubai-based Falcon Express Cargo Airlines is bidding to begin a freight service.

Saudi Arabia’s government is spending more than $500 billion on infrastructure, real estate and industry as the oil- rich economy expands a predicted 6 percent this year, the second-fastest rate in the Gulf Cooperation Council after Kuwait, according to International Monetary Fund forecasts.

While domestic airline traffic last year jumped 19 percent and the passenger total at the country’s 28 major airports rose almost 14 percent to more than 54 million, according to the aviation authority’s website, price caps have made it difficult for some operators to sustain profitability.

Sama, a discount carrier that had competed with National Air, collapsed in 2010 after only three years of operations.

Qatar Air Chief Executive Officer Akbar Al Baker said on July 3 that the carrier was interested in establishing a Saudi offshoot only if the government there agreed to a “fundamental rethink” of aviation policies, including fare controls and “excessive” fuel charges.

Al-Khaibary said the award of domestic operating licenses is being viewed as “very important for the kingdom.” Successful carriers will also be able to link services with international flights to the country, assuming bilateral agreements exist.

To contact the reporter on this story: Tamara Walid in Dubai at twalid@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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