Privatisation of KAC may take longer than expected

Privatisation of KAC may take longer than expected

Kuwait Airways privatization faces hurdles
Kuwait Airways privatization faces hurdles

Kuwait Airways has been forced to delay the arrival of new planes because the government has failed to approve the airline’s budget, as reported in Kuwait Times. The airline (KAC) had signed a contract to rent 15-20 aircraft from Airbus, but the first of those planes are now not expected until early 2014.

The Kuwait government has been on a long recess since the assembly was sacked in June when the Constitutional Court ruled the December 2012 election was null and void.

A new government was elected on 27 July and parliament is due to resume next week. The delay in approving KAC’s budget means the airline will not receive the first of 15-20 planes it had agreed to rent from Airbus until the beginning of 2014. “KAC will rent new planes once the new budget was approved,” a KAC source said. There also remains confusion over whether the airline will turn its back on talks with Airbus for a deal to spend KD850m on 25 new Airbus jets, and instead go with rival Boeing, as reported by Arabic daily Al Qabas.

Privatisation of the airline also is likely to take longer than expected, as the government works towards making the company profitable. Kuwait’s parliament first approved a plan to privatise the loss-making carrier in 2008 but the process has been repeatedly delayed. The National Assembly only voted to support the sale in January. In July, the Kuwaiti government paid off KD441 million worth of debt accrued by the airline as part of preparations to sell the national carrier. Paying off the debt, accumulated since 2004, is seen as vital before the company can restructure itself towards privatisation.

Under the proposed plans, Kuwait will offer a 35% stake in the carrier to companies on the country’s stock exchange and to local or international firms, state media agency KUNA said last year. The government will retain a 20 percent stake while 5 percent will be distributed to KAC employees. The remaining 40 percent will be allotted to citizens.

Gary Marshall
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Gary Marshall
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