Sign Of Increased Privatization In Mideast Nation

It's one small step for capitalism... and a potentially giant leap for the continued existence of Kuwait Airways. On Wednesday, the Kuwaiti parliament approved the long-delayed, government-backed plan to sell 40 percent of the troubled airline to the public, and another 35 percent to a long-term investor within the next two years.

Reuters reports the plan would give the government a 20-percent stake in the airline, with airline workers holding the remaining five percent. Under terms of the plan, which must be approved by the head of state, a Kuwaiti firm could bid for the 35 percent stake -- so long as that company isn't a domestic aviation business. Qualified "specialist foreign firms" could also bid.

The government will appoint two advisers to assign a valuation to the carrier, ahead of a sale.

Managers at the airline have wanted to privatize Kuwait Airways for some time, but government deputies opposed the move out of fear it would lead to job cuts. As part of the newly-announced sale plan, deputies were able to obtain assurances the government would hire any Kuwaiti workers terminated from the airline. The carrier will also offer early retirement packages.

The carrier lost most of its fleet in the 1990 invasion by Iraq, which led to the first Persian Gulf war. Kuwait Airways now flies a 17-plane, predominantly Airbus-sourced fleet.

As ANN reported, in August the carrier cancelled a $3 billion order with Kuwait's Aviation Lease and Finance Co (ALAFCO) for seven new Airbus A320s, and 12 Boeing 787s. Company officials say no new aircraft purchases are planned until the sale is finalized.

FMI: www.kuwaitairways.com