Takeover talk rises as Sama Airlines taxis to standstill

Rumours of a takeover surround Sama Airlines as the company is forced to ground its flights due to mounting losses. The Saudi budget airline will cancel services today in what it called a temporary measure after it recorded a loss of 1bn riyals (Dh979.4m). The carrier also said it was unable to secure support from the government or investors. "We remain hopeful that a financial solution will be found that will allow us to restart operations in the coming few days," said Bruce Ashby, the chief executive of Sama.

But speculation began to circulate that several rival airlines were sizing up the troubled carrier, with no date given for a resumption to Sama's services. Okaz, a Saudi newspaper, claimed on Sunday it had seen a copy of a statement from the kingdom's General Authority of Civil Aviation saying management at Saudi Arabian Airlines "had a desire to buy the institution Sama", adding Qatar Airways and Air Arabia "have the same desire". A spokesman at Air Arabia, based in Sharjah, declined to comment because: "These are all rumours and we don't comment on rumours."

Sama Airlines, Qatar Airways and Saudi Arabian Airlines were not available for comment. Any gap in services could leave rich pickings for other carriers. "The ability for competitors to exploit this will be governed by government attitudes as to whether they allow other carriers to come in and compete with Saudi Arabian Airlines," said John Strickland, an aviation analyst with JLS Consulting in London.

Although other Gulf states have "open skies" agreements, allowing different airlines to operate across national borders, Saudi Arabia does not. Mr Strickland said this gave Saudi Arabian Airlines an advantage over foreign competitors. "They could step in as a home market but they're quite a different carrier to what Sama was," he said. "On the other hand, Air Arabia would be a natural replacement."

Mr Strickland said Qatar Airways was an unlikely suitor but had previously displayed interest in establishing a low-cost airline. Religious concerns, however, may turn out to be as important as commercial ones. With only a few months until pilgrims around the world begin their journey to Mecca on the Haj, demand is soon to peak for flights to Saudi Arabia. Mr Strickland said: "The Saudi Arabian government doesn't want to see that pilgrims can't go on the Haj. There may be opportunistic chances to clean up."