Saudi civil aviation authority GACA has shortlisted seven of the 14 companies that submitted bids to operate domestic air services in the kingdom, state-run Saudi Press Agency reports.
The shortlisted bidders include companies from Saudi Arabia, the Gulf Cooperation Council (GCC) and China.
GACA invited applications in January, with a view to selecting an operator in September and launching services by April 2013. Saudia and Nas Air are the only two carriers currently licenced to operate scheduled domestic flights in the kingdom.
Qatar Airways chief executive Akbar Al Baker earlier this month confirmed that the Doha-based carrier is interested in launching a Saudi subsidiary.
He did not formally announce that Qatar Airways had submitted a bid to GACA, however, and the civil aviation authority has not identified any of the applicants by name. Bahraini flag carrier Gulf Air is also widely believed to be in the running.
Liberalisation has long been on the cards for Saudi's duopolistic home market, but a domestic fare cap and above-average fuel charges have made life difficult for new entrants.
Nas Air has shifted its focus onto international flights in recent years, while the only other private carrier in the kingdom, Sama Airlines, declared bankruptcy in 2010.