Losses force Sama to consider axing all domestic flights

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Saudi Arabian budget carrier Sama is considering suspending all domestic services after concluding that the airline simply cannot operate profitably under the restrictions of the kingdom's domestic fare cap.

In a candid disclosure of the difficulties it is experiencing in the Saudi market, Sama has detailed the heavy losses it is incurring on domestic services within the kingdom.

Sama admits it is losing SR40,000 ($10,700) on every flight on the Dammam-Riyadh route - one of its primary services - and has generated losses of over SR40 million in a year of operating to Medina.

Such has been the scale of the Medina losses that the airline has been forced to withdraw its services from Riyadh and Dammam to the holy city.

Chief executive Andrew Cowen says the economy-fare cap and the increasing cost of fuel are making it "impossible" for Sama to make money on domestic routes.

"Sama's board of directors has instructed the management team to evaluate suspension of all domestic flying until the situation improves and a reasonable return can be made," he says.

"This is not a decision we have taken lightly but we have no choice."

Sama would instead concentrate on its international operations. It has continued its gradual international expansion with new routes from Dammam to Beirut, and Riyadh to Assiut.

Cowen says: "We were regularly filling over 80% of our seats but simply were not able to charge fares that covered the costs of operating to Medina."

In addition to pulling off the Medina route, he says, Sama has halved frequencies on the Dammam-Riyadh connection despite "very respectable" passenger numbers.

While shareholders and the civil aviation administration have supported Sama, Cowen says the airline remains at a disadvantage to flag-carrier Saudi Arabian Airlines which, he claims, receives fuel at a different rate.

He says the Saudi authorities must complete the "unfinished business" of removing the fare cap and equalising fuel charges.