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Business of…Kuwait Airways

With Kuwait Airways’ stake sale likely to be the first privatisation of a Gulf-owned carrier (if anyone actually shows interest), Kipp looks at what could have happened that has led the airline to its downward spiral.

August 4, 2011 11:50 by

Privatisation

After two decades without profit, state-owned Kuwait Airways, which is seeking investors for a $280 million stake sale, is unlikely to attract much interest from international or regional investors, analysts have said. A potential stake sale would be the first privatisation of a Gulf-owned carrier.

But bidders face many political obstacles and the struggling airline will have to offer an attractive deal for investors and offer more control of operations to generate any interest.

A lack of suitable bidders could also weigh on the price. 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. 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.

The government has managed to convince the majority of Kuwait Airways’ staff to retire, or take other government jobs bringing down the crippling wage bill. Yet seller Kuwait might still have to revise its expectations (and the price) down.

 

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