Saudi Arabian Airlines will privatize five units next year, some through public listings, to pave the way for the flotation of its core transport business, company and banking sources said on Sunday.

The sources said the government had given the flag carrier's board the green light to turn its catering, handling, cargo, pilot training and technical and maintenance units into independent firms.

"Some of these firms can be listed, mainly catering and cargo, but others will probably need to be managed by the private sector, or outsourced," a source from French bank BNP Paribas said.

The bank is helping plan the privatization of the airline, one of the largest in the Middle East.

"Some of these divisions will be privatized within a year, others within 18 months," said the source, who asked not to be named. "We will start quite soon contacts with international and local firms interested in these privatizations."

A company source confirmed the privatization of the five branches was in the works but declined to elaborate.

"This is a deep restructuring of the company that aims at developing it and boosting its performance over a five-year period," the bank source said. "The productivity of the core business is burdened by other branches and the workforce, despite the major competitive advantage of cheap fuel."

Saudi Arabian Airlines carried 16 million passengers in 2005. Income that year from catering was 650 million riyals (USD$173.3 million), while cargo revenue was 1.5 billion riyals, and technical and maintenance provided 5 billion riyals.

The bank source said the privatization was aimed at boosting productivity, and that the company was considering an early retirement scheme to reduce its large staff.

"This plan will make Saudia (Saudi Arabian Airlines) ready for a public listing and one of the most lucrative airlines in the world," the source added.

Last month, Riyadh appointed Khaled al-Mulhim as new general manager of the company, and he said his priority was to optimize the value of the firm ahead of a privatization and flotation.

Mulhim had been instrumental as CEO in the privatization of Saudi Telecom, which floated a 30 percent stake in 2003.

Analysts expect Mulhim to try to improve efficiency, to enforce a customer-oriented mentality and deal with competition as the kingdom liberalizes air transport.

Saudi authorities have licensed two private airline firms. The finance minister said last month that Saudi Arabian Airlines could be the kingdom's next major privatization.