JEDDAH, 30 August 2007 — Saudi Arabian Airlines will purchase a fleet of new aircraft as part of a 10-year modernization plan, Khaled Al-Mulhim, its director general, announced yesterday. “We’ll also rent more aircraft to meet the growing demand,” he added.

Saudia’s expansion plan comes amid challenges posed by rivals within and outside the Kingdom. Mulhim expects that the annual Umrah pilgrim flow would reach 10 million within the next few years.

Speaking to Asharq Al-Awsat, a sister publication of Arab News, Mulhim also disclosed plans to privatize Saudia cargo before the end of this year. He said the airline would establish six companies to privatize its strategic units.

The Council of Ministers last Monday gave the national carrier the green light to convert its strategic units into separate companies. Saudia would be licensed to establish companies wholly owned by the organization in preparation for their privatization.

“This is a very important move,” Mulhim said about the Cabinet decision. “On the basis of that, we’ll establish six companies for catering, maintenance, cargo, ground service, aviation service, and Prince Sultan Aviation Academy,” he said.

He said the new companies would offer part of their shares to Saudis in initial public offerings two to three years after their formation.

Saudia offered to privatize its catering division in August last year and received tremendous response from investors. Saudia Catering recorded SR643 million ($171 million) revenue and SR142 million ($37.8 million) net profit in 2005.

“The next strategic unit slated for privatization is cargo. We have already taken steps to activate privatization of this unit before the end of this year,” he said. It will be followed by privatization of the ground service unit and maintenance unit. “The civil aviation service, which is the core activity of the airline, will be the last to be privatized,” he added.

He said the participation of strategic partners in the new companies would strengthen the airline, adding that the selling process would be carried out in a transparent manner. The companies will sell part of their capital in light of market share and assets, ensuring good prices for Saudia, the largest airline in the Middle East with a fleet of 120 passenger and cargo planes.

“Investors in each company should have the necessary qualification and experience,” he said, adding that offers made by investors would be opened in the presence of their representatives. “The top three bidders will be given another chance to review their bids and make final offers,” he added.