Oman plans to launch a budget airline in the fourth quarter as the country looks to diversify its economy away from oil.
The country’s aviation regulator has awarded a licence to Muscat National Development and Investment Company (MNDIC), a semi-government entity partially owned by Muscat Municipality, State General Reserve Fund, the country’s top sovereign wealth fund, and other Omani pension funds.
“We are looking at different markets such as the GCC, Central Asia and Africa,” the MNDIC chief executive Khalid bin Hilal Al Yahmadi told The National in a telephone interview.
Mr Al Yahmadi, however, did not disclose the investment or other operational details, saying these are “under study”.
Despite coming late to the game, Oman still anticipates potential for growth, as it anticipates air traffic demand to grow by 40 per cent by 2019. Neighbouring countries such as Saudi Arabia and the UAE have established low-cost airlines – Flynas, flydubai and Air Arabia.
“Based on our studies, flydubai showed potential that was not considered. We have potential with Muscat and Salalah’s good location,” said Mr Al Yahmadi.
The budget airline venture is to “fuel economic growth” for Oman. After the slump in oil prices, most Gulf economies that are heavily reliant on oil are now seeking stringent measures to cut costs and expedite their economic diversity plans to sectors such as aviation and tourism.
Saudi Arabia, where oil makes up 70 per cent of state revenue, has been seeking economic reforms, including a possible privatisation of its national oil company Aramco.
Oman also echoes the Saudi story. Last May, the IMF said that Oman must push ahead with the diversification of its economy if it is to weather the era of low oil prices. Oman is expected to run a fiscal deficit of 17 per cent this year, as the low oil price eats into export earnings and blows a hole in the country’s budget.
MNDIC is also seeking to develop projects over the coming five to 10 years across industries such as real estate, tourism, aviation and entertainment.
“We are used in the GCC to rely on the government, but this is a good lesson. It is good for people to rely on themselves and not look for government to provide opportunities and employment,” Mr Al Yahmadi said.
Separately, a top official at the Saudi aviation watchdog said that privately-owned Saudi Gulf Airlines will receive regulatory approval to start flights within the kingdom by the end of March.
The kingdom had planned to allow private carriers to operate domestic flights back in 2012.