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Mon 1 Aug 2011 06:28 PM

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Muted interest seen in Kuwait Airways stake sale

Analysts doubt struggling airline will be an attractive offer for international or regional investors

Muted interest seen in Kuwait Airways stake sale
Kuwaits government is keen to see its flag airline return to profit after more than a decade of losses

State-owned Kuwait Airways , which is seeking investors for a $280 million stake sale to privatise the carrier, is unlikely to attract much interest from international or regional investors, analysts said.

The struggling airline will have to offer an attractive deal for investors and offer more control of operations to generate any interest.

"It (Kuwait Airways) does not bring much attractiveness to any partner unless it gives a good deal and more control in its functioning," said John Strickland, director of UK-based JLS Consulting.

"The airline has been struggling for some time now .... it's unlikely to gather any interest from the other big players in the region."

UAE's Etihad airways said on Monday that media reports that it would be interested in Kuwait Airways are "speculative". Qatar Airways also stayed clear of claims that they may be potential suitors.

"I don't see how buying into a part ownership of a very specific national airline with issues will be of any interest to investors," said Peter Morris, chief economist at Ascend Aviation, a UK-based consultancy.

Kuwait Airways said it is offering 35 percent of its share capital of 220 million dinars ($805.3 million) to potential long-term investors, amounting to around $280 million.

Joint-stock companies listed on the Kuwaiti bourse and "specialised" international firms are allowed to subscribe, the statement added.

The deadline for submissions is August 25.

A potential stake sale would be the first privatisation of a Gulf-owned carrier.

"From the airline's aspect, this may be seen as an opportunity to raise capital for aircraft replacement," said Morris.

Kuwait Airways, which currently has 17 planes, last year, appointed Citigroup Inc. , auditors Ernst & Young and aviation consulting firm Seabury to handle the privatisation.

Kuwait's parliament approved a plan in 2008 under which the government will sell 40 percent of the airline to the public and 35 percent to a long-term investor.

"I don't see this as a good fit for any of the regional airlines Like Emirates, Etihad or Qatar Airways as they are international players," said a Dubai-based banker.

"There will be a process of due diligence and I think the airline will still be seen as more of a problem. Costs will be looked at and I don't see it being much value to investment firms."

Kuwait, the world's fourth largest oil exporter, is on a drive to boost its private sector and become a regional financial centre.

Its economy is largely dependant on oil revenues and driven by government spending.

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Ramesh 9 years ago

It is an excellent proposition for any group which is planning to start an airline - with an excellent infrastructure available at various major airports, a cash rich group can start effecting marketing and making money from day one. Kuwait Airways has invested lot of money in training and development of Staff, and their staff are the best technically amongst various carriers in this part of the world. KU also has excellent technical support outsourcing unit, who are one of the major profit-making unit within the airline, and this can be developed further to maximise the new unit's income. Overall, any new venture will have its own ups and downs, and in this particular industry, with the competition increasing everyday, buying into an existing set-up will have its own benefit for any new organization. Wishing all success to a new Kuwait Airways.

American in Kuwati 9 years ago

Sorry Ramesh but totally wrong !

John D 9 years ago

What? The most successful carriers are GCC airlines and Kuwait Airways isn't even in the playing field. It is so mismanaged and their fleet is so rundown that no one with any sense in their head would board their flights. There customer service is horrible and it seems their own government has no interest in this carrier. No one is bidding this carrier because of the politics involved, it is a no win sitation for the bidder. The government should buy it, build it up for the sake of the country like other GCC carriers. Kuwaitis need to invest in their own country for the sake of their nation and quit sending all their cash overseas because they have no confidence in the government. It is understandable that Kuwait Airways has a strong relationship with the Indian Airport Authorities, work for them Ramesh?