Qatar Airways says to launch Saudi operations by Q3
* Ticket, fuel price issues in Saudi Arabia resolved
* Discusses code sharing with two Indian airlines
* Not worried by 787 Dreamliner incident in Japan
By Rania El Gamal
MANAMA, Jan 16 (Reuters) - Qatar Airways has reached agreement with Saudi authorities on solving problems that blocked its entry into Saudi Arabia's domestic market, and plans to start operating there by the end of the third quarter, its chief executive said on Thursday.
"We have already now appointed a new CEO for the Saudi operations, and we are planning to launch the Saudi operations anytime between the middle to the third quarter of this year," Akbar Al Baker said in an interview.
Saudi Arabia's price caps for domestic flights have hurt airlines' profit margins, while fuel subsidies have helped flag carrier Saudi Arabian Airlines compete against rivals.
Baker, speaking on the sidelines of the Bahrain International Airshow, said those issues had now been resolved, though he did not give details.
"There is a compromise that has been accepted by the authorities regarding the price cap and the fuel price."
Saudi Arabia started opening up its aviation market in 2012 by awarding additional carrier licences. Population growth and rapidly rising incomes mean there is considerable room for expansion, analysts believe.
Currently, only Saudi Arabian Airlines and budget airline National Air Services serve a domestic market of about 27 million people. Foreign carriers can only fly in and out of Saudi Arabia, not within the country.
Qatar Airways has previously said its Saudi domestic carrier will be called Al Maha Airways and will start with main cities such as Riyadh and Jeddah, before moving to second-tier cities.
Earlier on Thursday another new airline, Saudi Gulf Airlines, said it had signed a $2 billion deal with Canada's Bombardier Inc to buy 16 CSeries jets with options for 10 more. It aims to start operating in the Saudi domestic market later this year or next year.
Airlines in the Gulf have also been exploring ways to expand in India's market. Last November India's Jet Airways closed a deal to sell a 24 percent stake to Abu Dhabi's Etihad.
Baker said Qatar Airways was discussing the possibility of sharing flights with two Indian airlines.
"We are talking to IndiGo and SpiceJet to do codeshare agreements," Baker said.
"We were with Air India and we had to stop it half-way, because they are showing interest to join the Star Alliance. So they stopped talking to us, maybe because of pressure from Star Alliance not to talk to anybody else."
Qatar Airways is a major operator of Boeing 787 Dreamliners, and said last year it had to forego $200 million in lost profit when regulators asked it to ground its 787s to check for technical problems. It said it received compensation from Boeing for the losses.
On Wednesday, a Japan Airlines Dreamliner was grounded at Tokyo's Narita International Airport as regulators demanded checks to see if the aircraft was fit to fly, a day after white smoke vented from the plane and a battery cell showed signs of melting.
Baker said he was not concerned by the incident: "As a matter of fact the problem that happened in Japan wasn't out of context. This kind of problem is expected in a new programme.
"The battery performed exactly as it was designed to - there was a defective single cell from the eight cells the battery has in a Dreamliner, and the damage was contained in that single cell. And the containment system performed exactly as it was designed to."
He added, "I don't think that there is anything that would (make) Qatar Airways reconsider that airplane."
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