Saudi Arabian Airlines is negotiating a Government-guaranteed loan of $4.33 billion to remove the financial problems which have delayed delivery of an initial batch of aircraft in an order for 61 Boeings, the first of which was ready in August.

The $7.5 billion order - placed in 1995 after huge political pressure from the US Government - covered four Boeing MD-11 freighters, 29 MD-90s, 23 Boeing 777s and five 747-400s. The cash-strapped airline was unable to secure international credit for the purchase, however.

The crisis came to light in late September when delivery of the first two MD-11Fs, scheduled for August, was postponed. The problem was confirmed when subsequent handovers, planned for September and October, failed to take place. All four aircraft now remain in storage at the Long Beach plant in California.

The problems have also led to hold-ups at Boeing's Everett site where the first six 777s and one 747 are in various stages of completion. Four 777-200IGWs were originally scheduled to be delivered by the end of November, with the fifth and sixth aircraft to be handed over in December. Despite the financial hold-ups, all pre-delivery tests were taking place as scheduled on the latest Saudi Arabian 777s, WB276 and 277, as Flight International went to press.

The least affected aircraft type appears to be the MD-90, the first of which was not due for delivery until this month. Three more were scheduled for delivery in December, with 14 following, at the rate of two a month, between January and July 1998.

Deliveries are then set to restart in January 1999 at the rate of two a month until April, with the balance of the fleet originally scheduled to be delivered in January and February 2000.

Boeing's recent decision to close down the MD-90 line and its statement that deliveries will cease around mid-1999 now suggests some late changes to this already dubious timetable.

The Saudi Government is guaranteeing a loan co-ordinated by finance house JP Morgan. The seven-year revolving credit loan, with a two-year grace period, involves Chase Manhattan, Saudi American Bank, National Commercial Bank and Gulf International Bank.

Source: Flight International