While most of its contemporaries are focusing on existing network expansion and moving into new markets, Saudi Arabian Airlines is taking an addition big step by privatizing itscargo division.
Earlier this year in April, the Saudi national carrier invited potential investors to submit proposals to acquire up to a 49 per cent share in the cargo unit, according to Saud A. Arab, general manager of cargo andairmail for Saudi’s cargo arm.
The privatization, approved by the Saudi government could be completed as early as year-end. The process will transform the airline into a holding company with different operating subsidiaries, each of which can havedifferent minority investors.
This will ultimately be followed by a stock exchange listing via an initial public offering (IPO), although Arab noted this was still some time away.“The privatisation will contributesignifi cantly to the effi ciency, profi tabilityand growth of the cargo unit,”Arab said, adding that the air cargomarket had become extremely competitive.
“There is very tough competition because not only are there many new comers to the air cargo market – especially the Asian market – but open skies developments is also freeing up the industry for newly established competition.”
While he acknowledges there is some degree of over-capacity, particularly in the China market, he said carriers are adding capacity becausethere is demand.
Meanwhile, like its competitors Saudi cargo is looking to tap new markets and has its eye on EasternEurope.
“I think its high time to go and establish ourselves there because we don’t have a presence there,” Arab said.
Currently Saudi cargo operates a fl eet of six dedicated freighters – four MD-11s and two Boeing 747-200Fs, one of which is leased, operating to 10 different destinations in Africa, Asia, Europe and the US. Arab said there are plans to add at least one more leased aircraft in 2008 to respond torising demand.
The airline also makes substantial use of the airline’s passenger fl eet, with up to 56 per cent of its cargo volumes carried in the passengerbelly holds.
As for Eastern Europe the fi rst step will be to establish a sales and marketing offi ce in Istanbul to focuson the region.
Currently the cargo division is studying the possibility of establishing an additional European hub – currently Saudi hubs out of Brussels– with three possible options: Vienna,Munich or Milan.
These locations are under consideration, according to Arab, because of their proximity to Eastern Europe.“It’s a promising market and anarea where we are not there yet,” hesaid. “After that we will look at SouthAmerica, but we must take it gradually,”he added.
– Donald Urquhart