AIR passengers in Saudi Arabia make many of the same complaints as travellers everywhere: long waiting times, cancelled reservations and late arrivals. But they do so with more than the usual world-weariness - with venom even, especially as they compare their airlines with those of their tiny Gulf neighbours. In the absence of a nationwide rail network or developed public transport, air travel assumes an even greater significance in a country of 2.1m sq km. It is deemed to be crucial to the countrys economic development as well as ensuring a sense of unity between the various areas of the kingdom. To that end, the Saudi government has imposed a 15-year price cap on domestic flights to ensure that flying remains affordable. But the cap has a downside. It has caused Saudi Arabian Airlines, or Saudi, the nation carrier, to make losses on the 10m passengers it carries on its local flights, Khalid Almolhem, the airlines director-general, confirmed in June. Peter Miller, director of marketing at Skytrax, a research company, says that the domestic fare restrictions have clearly hampered Saudia. They kept their in-flight entertainment and seat unchanged ... They cannot compete with Emirates or Qatar or Etihad because they have state-of-the-art products, Mr Miller says, referring to Saudias regional competitors. Many Saudis believe that keeping first-class seats reserved in case a member of the royal family shows up has contributed to the companys losses. In January, Mr Almolhem said that no-show passengers cost Saudia $450m in losses last year. But the Saudi authorities appear to be grasping the nettle. In 2006, the government whisked away Mr Almolhem from his post as chairman of the Saudi Telecom Company and put him in charge of the airline. He had successfully orchestrated the restructuring and privatisation of STC and was tasked to do the same with Saudia. Shortly after beginning the job, he split maintenance, catering, cargo, training and ground handling into separate units. Over the past two years, he has sold a 49 per cent stake in the catering operation to a consortium of Saudi groups and a 30 per cent stake in the cargo unit to Tarabut Air Freight Service. The number of employees has been cut to 18,000 people, down from a peak of 25,000 in 2004, by offering early retirement packages. He has also embarked on an expansion of the companys fleet. N 2007, Saudia signed a contract to buy up to 50 Airbus A320s and eight A330s, its first deal with the European company in more than 20 years. Saudia also plans to buy and lease 12 Boeing 787s. The deals ae reported by local media to be worth about $12bn, but Saudia has refused to give details. The aircraft are schedule to arrive in several deliveries beginning this year. The company has started fining passengers who cancel or reschedule their flights, in order to reduce losses. Mr Almolhem said in June that he planned to set up a special VIP flight for royalty and dignitaries. There is, however, much still to be done. Saudia is quite a long way behind in terms of what they have invested in their product. Onboard product in first and business class is pretty much on the level where Emirates was offering 10 years ago, Mr Miller says, referring to Dubais aggressively expansionist carrier. Financial Times