The long-running privatisation of Kuwait’s troubled national carrier moved a step further yesterday as Jazeera Airways said it planned to acquire a stake in the airline.
Jazeera Airways said that it had formally submitted a letter of intent to acquire 35 per cent of Kuwait Airways, seven years after the country’s government first announced plans for its privatisation.
The Kuwait-listed low-cost carrier, which announced its intention to bid for the stake in the airline in October, did not give any details about the size of its bid.
Jazeera described the privatisation as the first of its kind in the country to exceed the US$3 billion mark, but did not elaborate on whether this referred to the valuation of the 35 per cent stake or the airline in its entirety.
“We believe an efficiently run Kuwait Airways with a private-sector management approach benefits all stakeholders, especially employees who will be presented with an opportunity to transform and grow the airline into one that travellers seek as a first choice rather than a last resort,” said the Jazeera Airways chairman, Marwan Boodai.
“We believe Kuwait Airways should operate as an organisation that rewards employees for commitment and innovation, and should we succeed in winning the bid, Kuwait Airways employees will be the reason why we succeed in transforming the airline,” he said.
However, a shareholding in Kuwait Airways would be an uneasy match for Jazeera, with the risk of the cannibalisation of its own network, according to Will Horton, a senior analyst at the Centre for Aviation. “The risk is that a 35 per cent stake does not give Jazeera definitive control,” said Mr Horton.
“In an ideal world it could be pragmatic for Kuwait Airways to hand short-haul operations to the more efficient Jazeera, but practically there could be too many conflicts of interest.”
“Jazeera has built a profitable point-to-point network and may not want to get involved in Kuwait Airways’ long-haul growth, which would be very competitive but which the government probably sees as a strategic necessity,” he noted.
The Kuwaiti logistics firm Agility is the only other company known to be in the running for the 35 per cent stake, following comments by its chief executive Tarek Sultan in November.
The company did not respond to a request for comment.
Kuwait’s parliament first approved a plan in 2008 to privatise Kuwait Airways, which has not turned an annual profit for several years. However, the process has faced several economic, political and legal hurdles.
The government initiated a privatisation process in July 2011, seeking a strategic investor to take a 35 per cent stake in the company, together with a management contract.
The Kuwait Investment Authority was slated to subscribe to 20 per cent of the company’s shares, with the remainder to be held by employees and private investors through an IPO.
However, the process was shelved a mere three months later after the government decided to restructure the airline before the privatisation.
As part of the restructure, the airline announced the layoff of 1,000 staff last April.
The airline’s ageing fleet finally received a boost last December with the delivery of the first of a series of leased Airbus A320s, its first new aircraft in 17 years.
* Additional reporting by Shereen El Gazzar