All airports in Saudi Arabia will be privatized this year in order to improve services being rendered to passengers and cut public expenditure, a senior official has revealed.
Speaking to Al-Eqtisadiah daily, Abdul Hakeem Al-Tamimi, President of the General Authority Civil Aviation (GACA) said GACA’s privatization strategy aims to transform all airports and related sectors into companies fully owned by Saudi Civil Aviation Holding.
The ownership of the holding company would be transferred to the Public Investment Fund (PIF) at a later stage, the report said.
Three methods for privatization will be followed:
1. Transform each airport into a company
GACA will apply this system on King Khalid International Airport in Riyadh first. Al-Tamimi disclosed plans to sell minority stakes in the company to the public. A board of directors will be formed to manage the company.
Goldman Sachs will manage the sale of stakes in the Riyadh airport, the first major privatization of an airport in the country.
The exact size and potential value of the stake was not immediately known. Riyadh has the second biggest airport in Saudi Arabia after Jeddah's King Abdulaziz International Airport.
King Khalid International Airport handled 22.5 million passengers in 2016, up 0.9 per cent year-on-year. Saudi Arabia is trying to raise $200 billion over the next several years through stake sales in assets such as airports.
2. Sign contract with a specialized company for operation and maintenance
As similarly done with the new King Abdulaziz International Airport in Jeddah, GACA will bear the cost of the airport expansion project and the company will share the revenue, Al-Tamimi said.
3. Build, operate and transfer (BOT) system
“This system was applied on Prince Muhammad Bin Abdulaziz International Airport in Madinah and some other airports like Taif, Hail, Qassim and Yanbu, after signing deals with investors,” Al-Tamimi explained.
The government has also brought in foreign firms to manage some of its airports including the Dublin Airport Authority (DAA), which was awarded in 2016 the contract to manage and operate Riyadh airport’s new Terminal 5. Singapore’s Changi Airport Group was awarded in April a contract to operate the King Abdulaziz International Airport in Jeddah for up to 20 years.
“Some of the regional and domestic airports will be transformed into companies by the end of this year,” said Dr. Faisal Al-Sugair, Chairman of Saudi Civil Aviation Holding.
He added that this transformation was the first step of privatization, which will lead to the operation of all airports on a commercial basis.