Oct 24 (Reuters) – Saudi Arabia is in advanced negotiations to buy about 40 A350s from Airbus (AIR.PA) Aviation industry sources said it was part of a broader multi-billion dollar campaign to launch a new airline and challenge heavy carriers in the Gulf.
There is no guarantee of a deal, the sources said, but if the purchase deal is confirmed by the sovereign Public Investment Fund, it may be announced as early as this week when Riyadh hosts a major forum entitled the Future Investment Initiative (FII).
Sources said the final decision on the proposed deal, which is worth about $12 billion at listed prices, depends on political approval at the highest level, with Boeing also pushing for part of the expansion despite the cooler US-Saudi relations.
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One source familiar with the negotiations over the new airline, tentatively named “RIA”, warned that the matter was “not over yet”.
Neither Airbus, based in France, nor Boeing (ban) He had no comments. The Public Investment Fund did not respond to a request for comment.
Industry sources said Boeing was still confident of winning at least part of the total requirements for about 68-75 planes via the Boeing 787 Dreamliner, already in use in state-owned Saudi Arabia.
Reports said the new airline may also need smaller, narrow-body aircraft.
Reuters first reported in August that Saudi Arabia was discussing a significant demand for wide-body jet aircraft.
Bloomberg News reported on Sunday that any deal could include up to 80 aircraft.
The strategically important potential deal is among the economic topics that will be focused on ahead of the FII Forum, which is being held amid tensions between Washington and Riyadh.
The Fisheries Industries Conference is a presentation of Crown Prince Mohammed bin Salman’s Vision 2030 plan to diversify from oil by promoting new industries that generate jobs and attract foreign capital.
business relations
US President Joe Biden has vowed “consequences” for US-Saudi relations over the OPEC+ decision to cut oil production targets, which Riyadh has defended as serving market stability.
The crown prince visited France in July, where he met Macron, who last December became the first Western leader to visit Riyadh since the killing of Saudi journalist Jamal Khashoggi in 2018, causing an uproar in the West.
Analysts say there is little willingness on the part of Riyadh or Washington to disrupt trade and military ties, noting that Boeing remains a strategic supplier with huge defense contracts.
Saudia has a mixed fleet of Boeing 787 and 777 long-haul and short- to medium-haul Airbus A320 models.
The new airline will be based in the capital, Riyadh, while the state-owned Saudi Airlines will be based in the city of Jeddah on the Red Sea, under a transportation strategy that calls for the establishment of two hubs for rival Emirati and Qatari airlines.
A person familiar with the plans said that the aviation division of the Public Investment Fund is getting huge money to create an ecosystem for shipping companies, passengers, repair companies and airports.
The source said the Public Investment Fund was looking into buying and leasing options for a fleet that could eventually reach 200 planes.
Analysts warn that even with a major investment war, it faces a tough challenge to take on the strong aviation hubs of Dubai and Doha for Emirates and Qatar Airways respectively.
“They have built great networks and fleets, and they will be a strong competitive force for any new airline,” said James Halstead, Managing Partner at Strategic Air.
“Getting enough planes will be an important issue, as well as dealing with the shortage of trained pilots.”
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(Tim Hever reports in Paris, Aziz Al-Yaqoubi in Riyadh, and Youssef Saba in Dubai). Editing by Mark Porter and Emilia Sithole Mataris
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