Saudia ready to join the wave of Arabian Gulf IPOs

Saudi Arabian Airlines said that it was planning to raise a total of about 10 billion Saudi riyals (Dh9.79bn) by offering shares to the public in three of its subsidiaries.

Saudia expects to grow its fleet from 120 aircraft to a minimum of 240 to meet “expansion demand”.Francis Malasig / EPA

The ongoing boom in Arabian Gulf initial public offerings looks likely to continue for some time to come as companies look to cash in on a booming stock market.

On Monday, Saudi Arabian Airlines, or Saudia, said that it was planning to raise a total of about 10 billion Saudi riyals (Dh9.79bn) by offering shares to the public in three of its subsidiaries.

Muhammad Albakri, the chief financial officer of Saudia, said that the airline would float 30 per cent each of its ground-handling, cargo and maintenance subsidiaries.

“The next IPO will be Saudia Grand Handling Services – this is the ground handling company that has a monopoly on all the airplanes that fly in and out of the country,” said Mr Albakri at an aviation conference in Dubai.

“It was supposed to happen in September, but it was a tactical decision delaying it. It will happen in the next few weeks. We will free float 30 per cent.”

The IPO of Saudia Cargo will take place next year followed by Saudia Airlines Engineering and Maintenance share offer in 2017, he added.

The pace of activity in the Saudi primary market has picked up pace, with the state-owned National Commercial Bank launching the kingdom’s biggest-ever IPO. The bank aims to raise US$6bn from the sale of 500 million shares.

Saudi capital market authorities in August announced plans to ease restrictions on investments into the stock markets next year.

The flag carrier Saudia is also looking to tap the debt market in the coming six months, as it plans to double its fleet by 2020 and repay some of its debt.

“We are not looking into a single option, but multiple options. We are open to what makes business sense, including bonds and sukuks,” said Mr Albakri.

The money raised will be used to buy aircraft and taking care of some of our current debt.

“We have been talking with banks for the last two years. We are going to do it on a large scale, otherwise it’s not worth the headache,” he added without disclosing how much they are planning to raise.

Saudia expects to grow its fleet from 120 aircraft to a minimum of 240 to meet the “expansion demand”. The airline expects to have 21 million passengers domestically by 2020. Last year, it carried 14 million passengers and this year it is expecting 17 million.

“We keep growing year on year,” said Mr Albakri.

“This is to take advantage of the new airport in Jeddah, the new terminal in Riyadh, and the new airport in Medina. We get to have the capacity and this means at least doubling our current fleet size if not more,” he added.

The airline is also looking to replace 22 Boeing777-200 aircraft, which have been operational for 15 years.

“It is time to look at the newer 777 because they give better capacity and more fuel efficiency,” said Mr Albakri.

Saudia deploys its Airbus aircraft on medium to short-haul routes and its Boeing airplanes on long-haul routes.

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