Kuwait Airways privatisation committee headed by Mutlak M Al Sanae of the sovereign fund body Kuwait Investment Authority met on Sunday the 11th concluded its evaluation of the preliminarily Expression of Interest (EoI) with leaked media report with limited interest in the auction for sale.

While ALAFCO Aviation Lease And Finance Co. (KUW:ALAFCO) refuted press reports it intends to form an alliance with any party. With the government’s reluctant to accept Agility Logistics due to the unresolved legal battle in the USA covering serious allegations of corruption and fraud, puts the committee in a difficult position.

According to local press reports, the privatization committee has set criteria for the acceptance of the bid from the strategic partner focused on three main issues:

• Airline experience and the operation of a worldwide network.
• Solid expertise managing complex operations.
• Ability to provide technical and managerial support.

Although there have been unsubstantiated market reports that ALAFCO and Agility Logistics may form a consortium to acquire the 35% share but due to its lack of airline management expertise the offer may not be received well. With ALAFCO embroiled with the defunct airline Wataniya Airways to settle its outstanding debt. Agility Logistics would be interested in the cargo operations of Kuwait Airways as it would complement its core business and leverage its experience of the air lift operations in Iraq and Afghanistan.

Background:

Early 2008 the Kuwaiti parliament in a clear majority approved the plan to restructure Kuwait Airways Corporation into a private shareholding company. Under the plan, the government will sell 40 percent of the flag carrier to the public and 35 percent to a strategic partner (must retain the acquired share for a minimum of 3 years subject to the Kuwait Companies Law).

Kuwait Investment Authority formed the foundation committee for the privatization of Kuwait Airways Corporation, with Citibank, Ernst & Young and Seabury consulting retained as advisers. It set the closing date for acceptance of the EoI on the 25th of August 2011.

The most serious challenge facing the flag carrier are a number of unresolved labor disputes, the transfer of the airline staff to the newly formed entity, and its aging fleet considered to be the oldest amongst major carrier in the Gulf all  in the presence of the fierce competition from it neighboring airlines giants.


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