April 27, 2016 / 10:32 AM / 2 years ago

UPDATE 1-Saudi's Flynas to decide on Boeing vs Airbus order by early June

* Choice between Boeing 737MAX or Airbus 320NEO - CEO

* Decision expected by early-June

* Bombardier CS300 ruled out as not tested in Mideast climate (Adds detail, context, oversupply comments)

By Matt Smith

DUBAI, April 27 (Reuters) - Saudi Arabia’s Flynas will decide whether to order Boeing 737MAX or Airbus 320NEO planes before the start of the holy month of Ramadan in early June, the airline’s chief executive said on Wednesday.

The low-cost carrier is considering an initial order of 60 planes, with the possibility of a further 40, as it seeks to replace its existing fleet and expand.

Flynas currently leases Airbus A320s so choosing Boeing would create complications such as retraining staff to work on the U.S. firm’s aircraft, Paul Byrne told reporters on the sidelines of an industry event in Dubai.

“To switch ourselves, they (Boeing) have to do a phenomenal deal for us. That deal will have to cover that pain of transition, as it will be painful,” said Byrne.

“We are open to that argument, we see them as a player and what we want is something that will see the long-term future of Flynas. That door is wide open to both.”

Ultimately, with Flynas in the process of phasing out its leased Airbus fleet, whichever manufacturer it chooses will over time become the sole supplier.

Byrne was quoted earlier this year as saying the airline was also considering Bombardier for the potential order.

However, on Wednesday, he said it had decided against the Canadian manufacturer as its new CS300 aircraft had not been flown by a Middle Eastern carrier in the region’s harsh climate.

COMPETITION

Flynas, which turned a profit for the first time in 2015, was expected to do so again this year, Byrne said.

But while he welcomed increased competition in the regional airlines industry, he said the firm was feeling its impact.

“The optimism of 4-5 months ago has dampened down as we’re seeing a lot of extra capacity in the market, a lot of state carriers flexing their muscles and dumping capacity with no real plan,” said Byrne.

Competition is expected to increase as Saudi Arabian Airlines launches its new low-cost carrier, Flyadeal. Beginning services in mid-2017, it could have up to 50 planes flying by 2020, a senior executive said on Monday.

Flynas, 65-70 percent of whose flights are domestic, also faces caps on fares imposed by the Saudi government. These would remain in place for at least the next five years, Byrne said, although the limits would be eased on an annual basis.

He argued these charges were unfair on Flynas as, unlike flag-carrier Saudi Arabian Airlines, it was not subsidised by the state. (Writing by David French; Editing by Mark Potter)

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