RIYADH, Dec 17 (Reuters) - Saudi Arabia will review fuel
prices and give its civil aviation body powers to allow fare
increases as it struggles to move towards an open-skies policy,
the country's information minister said on Monday.
The Saudi airline industry is dominated by state-owned Saudi
Arabian Airlines (SAA), but the largest Arab economy still has
one of the Middle East's smallest networks relative to its size
and SAA and budget carrier National Air Services struggle to
meet demand.
Riyadh, which already caps economy fares, has announced that
it will allow new carriers to operate in the kingdom, but
analysts say that fuel subsidies for SAA will make it hard for
private companies to compete.
The General Authority for Civil Aviation (GACA) will work on
the issues within a broader "comprehensive strategic plan",
Information Minister Abdulaziz Khoja said in a statement after
Monday's weekly cabinet meeting.
He said that a government committee, including GACA, would
review fuel prices at airports "in comparison to prices in force
in regional airports and raise them to the appropriate level".
Economy-class ticket prices on domestic flights will also be
reviewed, with carriers able to increase prices gradually as the
date of travel approaches, in accordance with guidelines set by
GACA, the body said in an emailed statement.
"This actually seems to be a good stance to take, given that
SAA's fares are so heavily subsidised that it made it difficult
for others to compete, resulting in a continued shortage of
services on most routes," said a lawyer who has worked closely
on Saudi economic reform projects.
GACA was split from the Defence Ministry a year ago in a
move viewed as an attempt to accelerate reform in the sector. It
has since announced plans to allow foreign and private carriers
to operate in Saudi Arabia and launched an Islamic bond to
finance a new Jeddah airport.
Last month GACA said it would delay awarding new carrier
licences until the end of the year.
Information Minister Khoja added that private and foreign
companies would also be allowed to operate airports in
partnership with GACA.
The idea of using public-private partnerships to develop
airports has been under discussion in Saudi Arabia for some
time, the lawyer said.
(Reporting By Angus McDowall; Editing by David Goodman)