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(Reuters) – Qatar Airways has reached agreement with Saudi authorities on solving problems that blocked its entry into Saudi Arabia’s domestic market, and plans to start operating there by the end of the third quarter, its chief executive said on Thursday.

“We have already now appointed a new CEO for the Saudi operations, and we are planning to launch the Saudi operations anytime between the middle to the third quarter of this year,” Akbar Al Baker said in an interview.

Saudi Arabia’s price caps for domestic flights have hurt airlines’ profit margins, while fuel subsidies have helped flag carrier Saudi Arabian Airlines compete against rivals.

Baker, speaking on the sidelines of the Bahrain International Airshow, said those issues had now been resolved, though he did not give details.

“There is a compromise that has been accepted by the authorities regarding the price cap and the fuel price.”

Saudi Arabia started opening up its aviation market in 2012 by awarding additional carrier licences. Population growth and rapidly rising incomes mean there is considerable room for expansion, analysts believe.

Currently, only Saudi Arabian Airlines and budget airline National Air Services serve a domestic market of about 27 million people. Foreign carriers can only fly in and out of Saudi Arabia, not within the country.

Qatar Airways has previously said its Saudi domestic carrier will be called Al Maha Airways and will start with main cities such as Riyadh and Jeddah, before moving to second-tier cities.

Earlier on Thursday another new airline, Saudi Gulf Airlines, said it had signed a $2 billion deal with Canada’s Bombardier Inc to buy 16 CSeries jets with options for 10 more. It aims to start operating in the Saudi domestic market later this year or next year.

SOURCE REUTERS, Read more..