Two low-cost carriers are preparing to operate in Saudi Arabia's increasingly liberalised air transport market after the government approved their applications for licences.

Six companies last year applied for two domestic licences, one for operations based in Riyadh and the other for Dammam, made possible by the Saudi Arabian government's decision to break the monopoly of Saudi Arabian Airlines. Start-up Sama and a carrier being developed by National Air Services (NAS) immediately emerged as clear favourites for the approval. Their licences were formally awarded at the end of 2006.

Sama has raised over $50 million in private finance and has two Boeing 737-300s within Saudi Arabia, painted and equipped, with lease commitments on another two. "Our challenge now is to complete the air operator's certificate approval process," says Sama chief commercial officer Sudeep Singh Ghai.

The airline is intending to increase its fleet to eight 737s by the end of this year and operate 35 aircraft within five years. Sama says it will soon unveil its initial route network and plans to begin operating by the end of March.

While it will initially operate domestically, there are provisions enabling progress towards international operations within two years, subject to regulatory approval. Ghai says Sama is not rushing to expand internationally: "The domestic opportunity is huge. Our constraint is how many aircraft we can put into the air."

NAS, which is already active across a broad range of business jet charter activities, is also closing on plans to launch a budget carrier within the next few months. Its yet to be named budget airline will begin operations with five aircraft, increasing to 18 by around 2010.

The company, alongside Dubai-based private equity firm Abraaj Capital, approached easyJet last year to sound it out on possibly using the familiar easyJet brand under a franchise arrangement in the Middle East. EasyJet has been evaluating the proposition, but has not yet made a decision. Although NAS has not identified an aircraft type for its planned low-cost operation it has experience with Airbus A319s and A320s through its all-business-class Al-Khayala operation. NAS is already planning a big Airbus acquisition that will take its combined fleet from about 33 to over 100 aircraft within four years. "The additional aircraft will include the core fleet for NAS's newly licensed domestic carrier," says the company.

Support will be provided by Saudi, regional and international financiers and lessors. Over the first year of operations the network will develop to include 22 Saudi Arabian destinations and this will increase to 37 domestic routes by the end of 2008.

Source: Airline Business