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Germany's Lufthansa Group is evaluating further expansion into the Saudi Arabian market as the kingdom moves to open up its aviation sector to private operators as part of economic reforms, senior executives said on Wednesday.
Saudi Deputy Crown Prince Mohammed bin Salman last month launched an economic transformation plan, Vision 2030, to diversify the economy of the world's top oil exporter away from hydrocarbon revenues and to offer a bigger role to the private sector.
Aviation is a key element of the plan. An executive from Saudi Arabia's General Authority for Civil Aviation (GACA) told Zawya last week it is planning to gradually privatise up to 11 airports by 2020.
"It raises a lot of opportunities for us," Karsten Zang, Lufthansa's regional director for the Gulf, Iran, Afghanistan and Pakistan, told reporters in Dubai. "We are currently evaluating the situation and talking with our colleagues in Frankfurt about the next few steps."
Lufthansa, Europe's largest airline group, has been evaluating opportunities in the kingdom, the Arab world's largest economy, even before the economic plan was announced.
"We saw the potential before that and obviously it is a country with a lot of potential," said Tamur Goudarzi Pour, vice president for the Middle East, Africa and Southeast Europe.
The executives did not elaborate on the company's expansion plans.
Lufthansa Group already has strong links to the kingdom. It operates scheduled flights to Riyadh, Jeddah and Dammam. Last year at the Dubai Air Show, Lufthansa Technik, the German carrier's aviation services subsidiary, signed an agreement with Saudia Aerospace Engineering Industries (SAEI), the aircraft maintenance arm of the national carrier to support their maintenance operations and enhance existing capabilities.
Privatisation drive
The entry of the private sector into the Saudi aviation market is already underway. Saudi Arabian Airlines has privatised its catering unit and is planning to offload five more units, while the international arm of Ireland's government-owned Dublin Airport Authority was awarded a multi-million dollar contract in January to operate the new Terminal 5 facility at Riyadh's King Khaled International Airport.
Saudi Arabia stepped up the pace of economic reform after crude oil prices, which account for the majority of the government's revenue, plunged from a high of above $100 a barrel in early 2014 to around $46 last week.
Ratings agency Moody's has estimated that the government's annual budget deficit will average 9.5 percent of gross domestic product between 2016 and 2020, at around $324 billion, at current oil price levels.
© Zawya 2016
