Saudi Wealth Fund Is in Talks to Acquire National Airline
Saudi Arabia’s sovereign wealth fund is currently engaged in preliminary discussions regarding the potential acquisition of the kingdom’s national airline, marking a strategic move to invest significantly in transforming the nation into a thriving tourism destination.
According to sources familiar with the matter, who requested anonymity due to the confidential nature of the information, the Public Investment Fund (PIF) is exploring the possibility of adding Saudia, the 80-year-old flagship carrier, to its expanding portfolio of aviation assets as early as next year.
The discussions involve the PIF assuming ownership of the airline from the government with the aim of enhancing its operational efficiency and profitability. Subsequently, Saudia could undergo privatization or be integrated with Riyadh Air, a new airline being established by the wealth fund.
Details regarding the valuation of Saudia by the PIF remain unclear, as the sovereign wealth fund has previously received government assets without monetary exchange to prepare them for privatization. Saudia currently operates a fleet of over 142 aircraft and serves more than 90 destinations worldwide.
However, it’s important to note that no final decisions have been made, and discussions are still in the early stages. The proposed plan may face delays or be abandoned altogether, according to the sources.
The potential acquisition aligns with Saudi Arabia’s aspirations to elevate Riyadh as a prominent business hub and compete with major Gulf airlines for global transfer traffic. Riyadh Air, initiated by the PIF, aims to expand its network and challenge established regional carriers like Emirates and Qatar Airways. Concurrently, Saudia, headquartered in Jeddah, is undergoing a strategic repositioning to focus on religious pilgrimages.
Last year, the two Saudi carriers collaborated on a significant order of 78 Boeing Co. 787 Dreamliners, a deal valued at almost $37 billion by the White House.
Saudi Arabia’s ambitious goal is to attract 150 million tourists annually by 2030, as part of efforts to diversify the economy and reduce dependence on oil revenue. To support this vision, the PIF is leading the redevelopment of Riyadh’s airport into one of the world’s largest. Additionally, the fund has initiated ventures such as an aircraft leasing company, a helicopter firm, and investments in Saudia’s engineering unit.
With assets nearing $900 billion, the PIF recently acquired an additional stake in Aramco, bringing it closer to Crown Prince Mohammed bin Salman’s target of $1 trillion by next year. Tasked with driving Saudi Arabia’s Vision 2030 program, the fund faces the urgency of securing funding for its significant spending commitments amid government budget deficits projected until 2026.
Tarek Fadlallah, head of Nomura Holdings Inc.’s asset management arm in the Middle East, emphasized the government’s prioritization of sectors like tourism, aviation, healthcare, and entertainment as immediate priorities for resource allocation in the short to medium term.
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