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Thu 4 Mar 2010 05:21 PM

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Kuwait Airways sale spurred by wealth fund action

Kuwait Investment Authority authorised to establish a company to hold the airline’s assets.

Kuwait Airways Corp, the emirate’s unprofitable carrier, is a step closer to a public share sale after the Kuwait Investment Authority was authorised to establish a company to hold the airline’s assets, KAC Chairman Hamad Al Falah said.The Gulf state’s sovereign wealth fund is forming a committee that has one year to implement the privatisation, Al  Falah said in a phone interview today from Kuwait. The shareholding company will be called Kuwait Airways Co., he said.

Kuwait’s parliament decided in January 2008 to sell shares in the airline, which hasn’t made a profit since the 1990 Iraqi invasion. The government plans to offer 40 percent of the stock to the public, 35 percent to a strategic investor and 5 percent to employees, and keep the remainder. The sale was originally scheduled to occur by the end of 2009.

The cabinet “is going ahead with the privatisation and the KIA has taken over the process of the legal matter to transfer the company,” Al Falah said. “We hope to complete the process this year.”

The new airline company will be established with capital of 220 million dinars ($764 million), Al Falah said. Kuwait Investment Authority, supported by oil revenue, had assets valued at $228 billion at the end of 2008, the Council on Foreign Relations said in January 2009.Gulf Investment Corp. and Rothschild Co. completed an evaluation of Kuwait Airways’ assets last year. The carrier operates 17 aircraft including two Boeing 777s and a mixed fleet of Airbus A340s, A310s, A320s and A300-600s.

A committee has been formed to investigate allegations of corruption at Kuwait Airways, Communications Minister Mohammed al-Busairi told parliament March 2. “There are financial and management irregularities, and that is why an investigation committee has been formed,” he said.

Kuwait Airways had a loss of as much as 200 million dinars over the four years prior to the current fiscal year, which ends March 31, lawmaker Adnan Abdul Samad said last month in a statement.

“What’s happening is a deliberate program to rob Kuwait Airways so that it will be sold for the cheapest price,” lawmaker Saifi Al Saifi told parliament on March 2 as legislators debated alleged violations at KAC.

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