Chairman says low-cost carrier "definitely" interested in investing in loss-making rival
Kuwait's Jazeera Airways is “definitely” interested in investing in soon to be privatised, loss-making airline Kuwait Airways, the low-cost carrier's chairman told Arabian Business.
“Yes I would definitely focus on investing more on aviation in Kuwait, subject to a clean clear balance sheet,” Marwan Boodai, chairman of Jazeera Airways, said in an interview, when asked if he was interested to invest in rival Kuwait Airways, which is due to be privatised by thegovernment within the next three years.
“Like any investment you have to look at what the balance sheet is like and then you have to decide if yes it is worth investment,” he said.
“If you look at Kuwait Airways’ balance sheet for the last five years when they decided to privatise it, the Kuwait Investment Authority, along with Citibank, they didn’t do the brightest job, they should have sold it years ago.
“Since then, to date, the accumulated losses, which the government has cashed, reached KWD468m [US$1.663bn], which is published officially in our gazette,” he added.
This week, Jazeera Airways Group reported net profit for 4Q2012 soared 93 percent, compared to the same period in 2011.
Government-owned Kuwait Airways has this year been plagued by strike action by workers looking for better wages and conditions, its planes being grounded due to a safety concerns and bitter discussions with Iraq over aircraft stolen from it during the Gulf War.
“Governments are meant to govern, not run airlines. Once they get Kuwait Airways privatised, rest assured there is a huge weight of opportunities in Kuwait Airways that could be exploited but you need a private sector mentality to make sure you get the best returns,” Boodai said in an interview with Arabian Business in Kuwait City in August 2012.
Kuwait-based analyst Rick Bhandari estimated that Kuwait Airways had accumulated losses of over US$2.5bn and he believed it was “being run as a government ministry rather than a commercially viable operation” and the Kuwait government needed to absorb the losses in order to make the carrier more attractive to private investors.
“Not only would this result in better financial management of the airline… [and] will be beneficial for all the stakeholders and the overall aviation sector in Kuwait,” he said.
When asked if he would envisage the two airlines ever merging, he did not rule it out if the deal was attractive.
“Kuwait is a small market... It all depends on the economics and how things shape up in the future, if we can support each other and have a better, stronger business model [then] why not,” he said.
Kuwait's parliament approved an amended draft law paving the way for the long-overdue privatisation of Kuwait Airways, state-run news agency KUNA reported last month.
Parliament first backed privatising loss-making Kuwait Airways Corp in 2008 but the process has been repeatedly held up by the global economic crisis, political turmoil and a restructuring at the airline.
Under the draft law, the carrier will change its name to Kuwait Airways Company and own all assets and property of KAC, except for outstanding payments from the Iraqi government and Iraqi Airways, KUNA said.
Iraq and Kuwait agreed last year that Baghdad will pay US$500m in compensation for Gulf War-era debts. The cash will go to the state treasury, not KAC, the report said.
Under a plan approved by the cabinet in April the government will offer a 35 percent stake to companies listed in Kuwait and to "specialised" local or international firms within three years.
The government would retain 20 percent with 5 percent to be distributed to KAC employees.
The remaining 40 percent would be allotted in the same way to citizens registered with the Public Authority for Civil Information, the Kuwaiti body that issues civil identity cards.