The Privatization of the Press and the National Carrier: Part One
Abdul Rahman Al-Rashed

This newspaper is making a third of its shares available to the public in an initial public offering, while Saudia Airlines, is selling its shares on the open market. These developments are proof that we are entering a bold experiment; they also signal a shift in our conceptualization. Media and civil aviation are amongst several organizations previously considered very sensitive. At times, they have been nationally revered. Things are different nowadays. Their particularity renders them more appealing for buyers.

Recently, the Saudi Research and Marketing Group which owns Asharq al Awsat, and is considered one of the most influential media institutions in the eyes of the Arab public, decided to offer a third of its shares in an initial public offering. In the past, it would have been impossible to conceive of a media company being sold on the open market, where shareholders carry all the power. Not so long ago, no government could have imagined selling all or part of its national airline, which it considers as its symbol of national pride. Yet, here is the Saudi government joining other countries and announcing its intention to privatize Saudia Airlines, by selling shares to individuals on the local stock market. Do these acts herald the overthrow of old concepts after years of rejection?

This op-ed from Asharq Alawsat is interesting on several counts.

First, it explains why Arab News, one of the newspapers in the Saudi Research and Marketing Group stable has gone to paid-only access within Saudi Arabia. Saudi readers are capable of buying the paper daily from newsstands or by subscription. The web version is a direct competitor of the paper version. By ending that reader competition, it makes the paper itself more competitive in the marketplace. It also makes it more attractive to potential investors.

But opening the paper to public investors is only one step in the privatization march that the Saudis are now undertaking. Privatizing the national airline–even partially–starts a chain of events that is, in the long run, to the benefit of the government and citizens.

Privatized concerns need to be competitive. That means they cannot employ large numbers of workers who don’t really add to the bottom line. As a nationalized company, that is, as a branch of government, jobs tended to be handed out either through favoritism or simply as “employer of last resort,” neither of which served to ensure capability or quality in the workforce.

As a “government job,” these positions also drained money from the government coffers, without adding much if any value.

The Saudis announced last year that they were licensing a new company for domestic air travel. This would be in direct competition to Saudia. If Saudi were to survive no longer being a monopoly, then it will have to get its costs down and its quality up.

Saudia quality for international travel is, generally speaking, quite high. They are competitive in terms of service. But their fares are not. When I traveled to the Kingdom in January, Saudia was charging over $1,200 for round-trip travel between London and Riyadh. British Midlands was only charging around $800. Saudia still maintained an advantage in that it offered daily flights while BMI flew twice a week. That’s an artificial barrier to competition, however, and runs into WTO concerns.

This piece by Abdul Rahman Al-Rashed talks about the necessity for further privatization and is worth a look.