Saudi Air Lauches Privatization With Catering Unit

August 13, 2006

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State-owned Saudi Arabian Airlines kicked off a long-awaited privatization on Saturday by inviting bids for a stake of up to 49 percent in its catering unit.

The catering division is one of five the kingdom's flag carrier plans to privatize by the end of next year before floating a stake in its core transport business.

The airline, one of the three largest in the Middle East, is looking to sell between 30 and 49 percent of the catering unit and has set a September 27 deadline for bids.

"It is expected that the catering business will undergo restructuring to become the New Catering Company, a new firm under the helm of Saudi Arabian Airlines," Saudi said in a statement.

Bidders will also get a role in the new company's management and should bring some expertise in the catering business, the statement said.

Launched in 1981, the catering business, including on board duty free sales, generated a turnover of 643 million riyals (USD$171.5 million) in 2005, a net profit of 142 million riyals with a net operating margin of 25 percent.

The statement gave no comparative figures for the previous year.

The airline, which carried 16 million passengers last year, also hopes to privatize its baggage handling, cargo, pilot training and technical and maintenance units, some through public listings.

Saudi authorities have licensed two private airlines. The finance minister said earlier this year that Saudi Arabian Airlines could be the kingdom's next major privatization.