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)

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.