Foreign airlines will soon be allowed to fly domestic routes in the Kingdom, the General Authority for Civil Aviation (GACA) said Sunday. As and when the decision is taken, it will open the market beyond state-owned Saudi Arabian Airlines (Saudia) and private National Air Services which are struggling to meet the high demand. GACA said in a statement carried by the state news agency that it will let both local and foreign companies apply for licenses to run domestic flights by the end of January. The decision comes six weeks after King Abdullah, Custodian of the Two Holy Mosques, split the responsibility for the aviation sector from the Defense Ministry, appointing Prince Fahd Bin Abdullah Bin Muhammad, a former deputy aviation minister, as head of the newly independent GACA. The new authority comes directly under the aegis of King Abdullah, which some analysts interpreted as meaning it will have more power to institute reforms. In April, the advisory Shoura Council recommended that the Kingdom study allowing Gulf airline carriers to operate in the Middle East's largest economy. Saudia and National Air Services, a lower-cost private carrier, now serve a domestic market of around 27 million people, but with a price cap on domestic flights private airlines have struggled with their profit margins. Last year a third carrier, Sama Airlines, was forced to suspend its operations. By contrast Saudia receives fuel at subsidized prices, allowing it to continue to serve the domestic market despite the ceiling on ticket costs. Saudia is also moving through a slow process of privatization, which was started in 2006 by splitting the carrier into six units with a view to selling each separately. Saudi Airlines Cargo has already been partly privatized while the ground handling services unit was merged last year with National Handling Services and Attar Travel Company. Earlier this year the airline said it hopes to hold a much-delayed initial public offering of its catering service, which is estimated to be worth up to $540 million (about SR2 billion).
