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Saudi market opens up further

Saudi Arabian Airlines is starting to face new competition on regional international routes as the country's two budget carriers look to expand outside the highly competitive domestic market.

Dammam-based Sama, which launched in March 2007 and currently serves 12 domestic destinations in Saudi Arabia, began operating international flights in November.

It has quickly grown its new international network to five destinations - Abu Dhabi, Amman, Damascus, Dubai and Latakia. Chief executive Andrew Cowen says five more international destinations will be added within the next three to four months.

All of Sama's international flights are being operated as charters because most of Saudi Arabia's bilaterals with other Arab countries currently only allow one local carrier to operate scheduled flights. Saudi Arabian was the only carrier in the kingdom until the government awarded licenses in 2006 to Sama and NAS Air.

"The bilaterals need to be amended," Cowen says. "We expect that will be done in due course but wanted to get started in our international operations."

NAS Air president Taheer Aguel says it too is seeking approval to begin international flights in early 2008. The government now has to decide whether to let both new carriers compete against Saudi Arabian on key regional routes or split each route between Sama and NAS Air.

NAS Air launched low-cost services in February and now serves 21 cities from its Riyadh base with six Airbus A320s. In anticipation of liberalisation, it has placed orders for 20 A320s and five Embraer E-190s. Saudi Arabian, which has talked about launching its own budget carrier, also has ordered 22 A320s and signed lease deals for another 20 A320s.

But Sama has decided against ordering new aircraft and for at least the next few months will keep its fleet at only six Boeing 737-300s. "It just doesn't make sense to pile into the market and take on aircraft at the current high prices," Cowen says.

But he adds demand for low-fare services in Saudi Arabia is high and the carrier remains upbeat about its prospects domestically and regionally. Sama, which has already passed the milestone of 500,000 bookings, expects to end 2007 with an average load factor of 60-65%.

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