Kuwait Airways' privatisation might not be a runway success.
After two decades without profit, the oil-rich nation is seeking to off-load a 35 percent stake in its national carrier to a strategic partner.
The hope is that this could allow the company to turn itself from a bloated and inefficient business into a lean and mean flying machine serving the travel needs of the Kuwaiti population.
But the implied asking price looks lofty, bidders face many political obstacles, and the business case doesn't look compelling.
True, the government appears to have overcome one major problem to the airline's restructuring: it managed to convince the majority of Kuwait Airways' 2,600 plus well-paid staff to retire, or take other government jobs, according to a person close to the airline.
That should bring down the crippling wage bill, estimated at around 30 percent of revenues by Kuwaiti ratings agency Capital Standards.
Yet seller Kuwait might still have to revise its expectations down. The government expects the post-privatised share capital of the airline to be around KD220m ($806m). This implies that a 35 percent stake could fetch $282m.
That valuation was established by Rothschild in June 2009. Since then, shares in Kuwait's Wataniya - which ceased operations this year - and budget operator Jazeera Airways have fallen by between 87 percent and 20 percent.
A lack of suitable bidders could also weigh on the price. Kuwaiti airlines aren't allowed to bid. And it is hard to imagine government-owned carriers like Dubai's Emirates or Abu Dhabi's Eithad Airways taking control, given the regional political rivalries.
Meanwhile, Qatar Airways is looking at its own initial public offering. A bid probably makes most sense for an international airline that already has routes in the Gulf like, say, Lufthansa.
There are other niggles too. Kuwait's promise to provide cheaper fuel to Kuwait Airways than to other airlines operating out of the country might be seen as state aid.
Assuming the airline is privatised with its existing debt and a new fleet is needed, it is likely to take a number of years before it returns to profit. By that time plans for a rail network linking Gulf countries - which will ultimately reduce the need for air travel -- will be closer to reality.
If Kuwait wants this airline privatisation to take off, it might have to lower the ticket price.
(Una Galani is a Reuters Breakingviews columnist. The opinions expressed are her own)For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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