This month GACA said 14 companies had applied for licenses to operate domestic and international flights in the country, seven of which have been short-listed.

The list of the seven pre-qualified consortia also includes Chinese firm HNA, the parent company of Hainan Airlines Co Ltd (600221.SS), the Islamic Development Bank IDB.L, Nesma Holding, and United Arab Emirate's private carrier Falcon Express.

Saudi Arabia, the biggest Arab economy with a population of over 27 million, still has one of the smallest airline networks in the region relative to its size.

Saudi Arabian Airlines, the national carrier, and private low-budget carrier National Air Services NAS.L are the only options for flying within the country, where demand for flights is high.

More than 54 million passengers passed through Saudi Arabia's 27 airports last year, according to data from GACA, rising 13.6 percent from 2010.

Licensed foreign carriers can fly in and out of Saudi Arabia but not within.

With a price cap on domestic flights, private airlines have struggled with profit margins. In 2010, the kingdom's third carrier, Sama Airlines, was forced to suspend operations.

Most of those seeking a license are eyeing low-cost flights in the kingdom, where business travel is rising and religious tourism is booming.

Qatar Airways announced its plans to enter the Saudi domestic aviation sector earlier this month.

GACA will meet with the seven pre-qualified consortia in August and the deadline to submit bids will start in September, the official stated.

The announcement of the winning firms or consortium will be in October while operations are expected to start at the end of next year. (Reporting by Asma Alsharif, editing by William Hardy)

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