GACA aims to privatize all airports by year-end

July 27, 2017

Saudi Gazette report

– Saudi Arabia intends to privatize all its airports this year after converting them into companies in order to improve services being rendered to passengers and cut public expenditure, said Abdul Hakeem Al-Tamimi, president of the General Authority Civil Aviation (GACA).

“GACA’s privatization strategy aims to transform all airports and related sectors into companies fully owned by Saudi Civil Aviation Holding,” Al-Tamimi told Al-Eqtisadiah daily.

The ownership of the holding company would be transferred to the Public Investment Fund (PIF) at a later stage.

“The main objective of the privatization move is to improve services being rendered to passengers and make targeted sectors profitable to balance expenditure with revenue,” he explained.

He said GACA would follow three methods for privatization.

One way is to transform each airport into a company and GACA want to apply this system on King Khalid International Airport in Riyadh first. He disclosed plans to sell minority stakes in the company to the public. A board of directors will be formed to manage the company.

The second method is signing contract with a specialized company for operation and maintenance of the airport as happened in the case of 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,” he added.

The third option is the build, operate and transfer (BOT) system. “We have applied this system on Prince Muhammad Bin Abdulaziz International Airport in Madinah and some other airports like Taif, Hail, Qassim and Yanbu, after signing deals with investors,” he explained.

In this case, GACA employees will be transferred to the investing company, which will bear the capital investment while GACA will share the revenue. “The privatization of all airports in the Kingdom will be completed in phases and in the form of groups,” Al-Tamimi said.

Meanwhile, the Kingdom has hired Goldman Sachs to manage the sale of stakes in the Riyadh airport, the first major privatization of an airport in the country.

The Saudi Civil Aviation Holding plans to sell a minority stake in the airport, Reuters news agency reported on Tuesday, quoting informed sources. 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.

Saudi Civil Aviation Holding was set up to manage the privatization process, GACA said on its website.

Dr. Faisal Al-Sugair, chairman of Saudi Civil Aviation Holding, confirmed that Goldman Sachs has won the contract to conduct a study on Riyadh airport’s privatization.

King Khalid International Airport handled 22.5 million passengers in 2016, up 0.9 percent year-on-year. Saudi Arabia is trying to raise $200 billion over the next several years through stake sales in assets such as airports.

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.

Al-Sugair said his company has set out an executive plan to privatize airports after the ministerial committee approved the strategic project. “We are going ahead with our plan,” he added.

KKIA was transferred to Riyadh Airports Company by the middle of 2016 while King Fahd International Airport in Dammam into Dammam Airports Company in July 2017, he said.

“Some of the regional and domestic airports will be transformed into companies by the end of this year,” Al-Sugair said, adding that this transformation was the first step of privatization, which will lead to the operation of all airports on a commercial basis.

July 27, 2017
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