Saudi aviation reforms to attract foreign airport operators

via Reuters

• New rules over next 18 months
• More open to foreign interest
• Incentive scheme for airports

Saudi Arabia has unveiled reforms and new regulations to encourage more foreign investment in its aviation sector, as part of a privatisation push.

The new economic policy framework aims to create a “level playing field” for global operators and investors in the kingdom, according to the president of the General Authority of Civil Aviation (Gaca).

Among the reforms, many of which will be phased in over the next 18 months, qualifying rules for airport operators have been expanded, and processes for new entrants to enter the Saudi market will be streamlined.

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Airports will also have more flexibility to diversify revenues by increasing non-aeronautical revenues, while airport performance will be linked to a new incentive scheme.

Ground handling services and air cargo will be opened to competition, and licensing processes will also be streamlined.

The economic licence requirement for charter flights will be removed for foreign carriers, reducing the cost of doing business. 

A new certificate will also be introduced to allocate international traffic rights on constrained routes for national carriers to ensure equal opportunities.

Supporting the Aviation Strategy

Gaca president Abdulaziz Al-Duailej described the reforms as the “most significant transformation” since the launch of Vision 2030.

He said: “The regulations will enable the realisation of the Saudi Aviation Strategy, which is mobilising $100 billion in investment from public and private sector sources by 2030. 

“The regulations create an open, dynamic and competitive market, setting a level playing field for global operators and investors in the kingdom.”

Linus Bauer, founder and managing director of Bauer Aviation Advisory, told AGBI that the regulations represent a “significant step” towards creating a more open, transparent and sustainable aviation sector in Saudi Arabia.

“The new policy framework will likely increase competition among existing operators and attract new entrants to the market,” he said. “This increased competition drives innovation, improves services, and potentially reduces prices for consumers, especially in the low-cost carrier segment.”

Andrew Charlton, managing director of Aviation Advocacy, an independent air transport-focused strategic consulting and government affairs consultancy, said: “Aviation has proven, time and again, to be a driver for economic growth. Anything that invests in that sector is going to help. Regulations are very important to aviation and anything that focuses on making them more streamlined, more adapted and that encourages competition can only be a very positive step.”

Existing foreign presence  

Foreign operators already run some airports in Saudi Arabia.

The Irish company DAA International has operated Terminal 5 at King Khalid International Airport in Riyadh since it opened in 2016, and last year it won a five-year deal to run King Abdulaziz International Airport in Jeddah. 

It also signed a contract in 2022 to operate the new airport at The Red Sea Development Project.

Bauer said that streamlined processes and the removal of certain restrictions could make Saudi Arabia an even more attractive destination for foreign airport operators.

The reforms are part of the Saudi Aviation Strategy, which aims to unlock $100 billion in private and government investment in airports, airlines and aviation support services by the end of the decade.

It is also intended to extend Saudi Arabia’s connectivity from 99 to more than 250 destinations across 29 airports and treble annual passenger traffic to 330 million. Two global long-haul connecting hubs will be established and air cargo capacity is expected to increase to 4.5 million tonnes. 

Gaca had previously announced enhanced regulations for passenger rights protection. These come into force in November, and will result in bigger fines for some violations. The tougher regulations cover ticketing, boarding, in-flight services, baggage handling and passengers with special needs.

In some cases, compensation will rise to 150 to 200 percent of the original ticket value.