Saudi urged to consider inviting in Gulf airlines

JEDDAH, Saudi Arabia Tue Apr 5, 2011 2:51pm EDT

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JEDDAH, Saudi Arabia (Reuters) - An advisory council in Saudi Arabia has called for a study on allowing Gulf airlines to fly domestic routes in the biggest Arab economy as the national carrier struggles to meet demand, a spokesman said.

"The Shoura Council (recommended) a study on allowing some Gulf airline carriers to operate within the kingdom," Mohammed Almohanna, a council spokesman, told Reuters by telephone on Tuesday.

The Shoura Council, which advises the rulers of the world's biggest oil exporter, urged the civil aviation body to carry out the study.

Currently, Saudi Airlines and low-cost carrier Nationall Air Services serve a domestic market of around 27 million people.

With a price cap on domestic flights, private airlines in Saudi Arabia have struggled with their profit margins, leading a third carrier Sama Airlines to suspend its operations last year.

State-owned Saudi Airlines, which is currently undergoing a privatisation process, receives fuel at subsidised prices which puts it at an advantage, allowing it to continue serving the domestic market but its services are not enough for the country's needs.

"There is great demand for domestic operated flights, especially as demographics are strong and Saudi Arabia can not meet rising demand," said John Sfakianakis, chief economist at Banque Saudi Fransi.

"Opening up the market should help competition and improve services and supply of flights," he added.

Many in Saudi Arabia complain of a shortage of flights in smaller towns and poor quality due to an absence of competition. (Reporting by Asma Alsharif; Editing by Firouz Sedarat)

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