Middle East carriers eyeing IPOs

Air Arabia, for example, is flush with cash from a recent IPO and is moving forward confidently with a big new order for up to 49 A320s this week, as well as the establishment of a cross-border venture in Morocco to tap the North Africa/Southern European market.

There are two driving forces for privatisation in the region. Firstly, the massive fleet plans of the region’s airlines are providing the imperative for carriers to go public to diversify their funding sources and trim debt ratios.

Emirates this week confirmed plans to sell up to 30% of its shares in an IPO, although a timeframe was not disclosed. The airline is reported to be considering an IPO within the next two or three years, that could value the airline at up to USD30 billion. Qatar Airways Chief Executive Akbar al Baker also disclosed plans this week for an IPO by 2015, once the company records a profit. In the meantime, it will fund its considerable aircraft purchases via bank loans.

Meanwhile, restructuring is another key driver, with Saudi Arabian Airlines and Royal Jordanian well down the path of privatisation as part of wide-ranging national reform agendas.

Gulf Air, under its new 'Way Forward' strategy, this week confirmed it is seeking an IPO as early as 2008, to help fund its fleet modernisation programme involving up to 35 new aircraft. Gulf Air has cut its losses from USD1 million per day earlier in the year to a still sizeable USD600,000, but is confident of completing a turnaround by next year or 2009.

The early movers will likely be embraced by a market enthused by the Middle East growth story.