Saudi Arabian start-up carrier SaudiGulf Airlines is intending to have a fleet of around 20 aircraft within three years, but is facing a tough operating environment.
The local Al-Qahtani Group is behind the carrier, which emerged to take one of the new airline licences offered by a Saudi government tender last December.
It intends to develop a premium carrier operating domestic and regional routes, probably with leased Airbus A320s, says a source familiar with the situation.
"There is so much volume in Saudi," adds the source. "There's a market for everybody."
SaudiGulf Airlines plans to take six aircraft in its first year, rising to 11 in the second, and have around 20 in the third.
The airline's corporate headquarters will be in Dammam but it will probably operate primarily from Riyadh or Jeddah.
Bahraini flag-carrier Gulf Air, under former chief Samer Majali, co-operated with the airline, assisting it with securing the economic licence. The new company is seeking to obtain an air operator's certificate.
Saudi Arabia's government has previously tried to open the market to other airlines but efforts to establish a new low-cost carrier, Sama, failed after the airline struggled to deal with a government cap on domestic fares.
Qatar Airways has also secured a licence to enter the Saudi Arabian internal market.